Government’s PRS strategy is ‘in tatters’

Government’s PRS strategy is ‘in tatters’

10:19 AM, 17th November 2022, About 2 years ago 11

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Government policy has left the private rented sector (PRS) ‘in tatters’ as figures show the number of homes to rent falling, but tenant demand continues to rise.

The criticism comes from the National Residential Landlords Association (NRLA) which says that since 2015, the government has embarked on a deliberate effort to discourage investment in private rented housing.

This has included measures to restrict mortgage interest relief and imposing a 3% stamp duty levy on the purchase of homes to rent out.

However, earlier this year, the Levelling Up, Housing and Communities Secretary, Michael Gove, argued that shrinking the private rented sector would help more people become homeowners.

The number of households in the PRS

Official figures show that the number of households in the PRS has fallen by more than a quarter of a million over the past five years.

That is despite demand from prospective tenants continuing to soar, with students this year among those scrabbling to access a dwindling number of properties.

According to Zoopla, demand for private rented housing in the UK this year is up 142% compared with the five-year average, whilst the supply of such homes has fallen by 46%.

A similar trend has been reported by Rightmove who say that, in Q3 2022, tenant demand increased by 20% compared with Q3 2021.

Demand for private rented housing has gone up

Data for the National Residential Landlords Association has found that in the third quarter of 2022, 65% of landlords reported that the demand for private rented housing had gone up.

This was up almost 10 points compared with the previous year.

Local authorities have also raised concerns that the flight of housing out of the private rented sector puts extra pressure on already lengthy social housing waiting lists.

The trend of ever-increasing demand takes place despite the number of owner-occupied households in England having increased by over one million in the past five years.

‘Strategy for the private rented sector lies in tatters’

Ben Beadle, the NRLA’s chief executive, said: “The government’s strategy for the private rented sector lies in tatters.

“The fact that the supply of homes to rent is falling despite an increase in demand is a damning indictment of tax decisions which serve only to increase rents and make home ownership more difficult to achieve.

“Further tax hikes on the sector risk making an already bad situation worse.”

He added: “Ministers need to recognise that a healthy and vibrant private rental market needs to sit alongside, rather than be in competition with, efforts to support homeownership.”


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Comments

Chris @ Possession Friend

13:34 PM, 17th November 2022, About 2 years ago

The NRLA talking straight to Govt and calling them out is Longggg overdue, - but welcome.

Churchills Tax Advisers

16:00 PM, 17th November 2022, About 2 years ago

Tax is killing landlords:

Net rental income £50000
Interest £(40000)
Accounts profit £10000

Earnings/pension £20000
Net rental income £50000
Taxable income £70000
Tax on rent £15946
Relief for interest £(8000)
Net tax £7946

Accounts profit £10000 - tax £7946=£2054 profit after tax!!!

Hardly worth it, especially with increasing interest rates, falling house prices and more and more regulation. No wonder landlords are heading for the hills!

Simon Williams

16:17 PM, 17th November 2022, About 2 years ago

Reply to the comment left by Chris @ Possession Friend at 17/11/2022 - 13:34
Couldn't agree more. NRLA/Ben Beadle criticism of government is normally akin to being savaged by a dead sheep.

I never really get a sense of NRLA truly fighting for landlords' interests. Instead a lot of waffle about "looking forward to working with government" and "more should be done to root out criminal landlords". Great!

Chris @ Possession Friend

16:25 PM, 17th November 2022, About 2 years ago

@Simon, Absolutely agree ( loved the analogy with dead sheep, and no that's nothing to do with me being Welsh 😉
But I like to be fair when its called for, and if the NRLA and Ben are finally steering the ship in the right direction, then they'll have credit for that.
( I did say, ' if ' mind )

Smiffy

19:21 PM, 17th November 2022, About 2 years ago

Reply to the comment left by Gone Fishing at 17/11/2022 - 16:00
But this model is always going to struggle to work, when it is so highly geared. After paying the interest you've only got £10k (20%) left to cover all your other expenses such as repairs, testing insurance etc. And nothing to pay off the capital loan!

It just doesn't work, you've got to increase the rents or reduce the interest, just to return some cashflow, regardless of the tax situation!

Old Mrs Landlord

9:40 AM, 18th November 2022, About 2 years ago

Reply to the comment left by Chris @ Possession Friend at 17/11/2022 - 16:25
"Savaged by a dead sheep" first used by Denis Healey about Geoffrey Howe MP in M. Thatcher's government.

Churchills Tax Advisers

10:42 AM, 18th November 2022, About 2 years ago

Reply to the comment left by Smiffy at 17/11/2022 - 19:21
Of course, this is a fairly extreme example, but by no means uncommon, it highlights the impact for any geared landlord in higher rate tax brackets.

Geared landlords tend to be expecting to make most profit from capital gains. So, now property prices are coming down and interest rates are going up, plus high risk due to reduced landlord/increased tenant protection, there is no good reason to remain a landlord. Might as well sell up and earn "risk-free" interest.

Governments can only push landlords so far, until they say enough is enough, I might as well sell up. No wonder the availability of rental properties is reducing.

Chris @ Possession Friend

10:48 AM, 18th November 2022, About 2 years ago

Reply to the comment left by Gone Fishing at 18/11/2022 - 10:42
I saw figures somewhere ( sorry can't recall ) recently that there were previously circa 350 k properties advertised for rent, currently its 214 k

Rennie

0:00 AM, 9th December 2022, About 2 years ago

Gove must be a fruitcake. Who is going to buy a house when Klaus Schwab is going to make sure you own nothing and will be happy? Even people who don't know about Klaus Schwab are not going to be able to afford a house (mortgage, deposit, maintenance, falling value [somebody said 30% possible drop this coming year], cost of heating, cost and availability of food, job losses on the horizon, the next pandemic they are going to fake)

Reluctant Landlord

17:47 PM, 9th December 2022, About 2 years ago

Reply to the comment left by Chris @ Possession Friend at 17/11/2022 - 13:34
straight talking does not mean being fixated on tax as a reason for response though...this only plays into the hands of those who think that all private LL's are in in for a the money.

The NRLA had been completely deficient in hitting the real issue home that increased legislation is proving so damaging and detrimental to the sector in general with the fear that LL's wont be able to take control back of their own property is THE real reason for the the PRS diminishing.

With more government intervention planned to strike at the heart of PRIVATE property ownership, its hardly surprising people want out!

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