Plea to keep landlords in the PRS

The government needs to act fast to prevent a housing disaster, with more people renting than ever before and fewer landlords willing to invest in rental properties, one expert says.

Neil Cobbold, the managing director of automated rental payment firm PayProp UK, points to an analysis of HMRC data by accountancy firm UHY Hacker Young.

It reveals that the private rented sector (PRS) lost 116,000 properties and 70,000 landlords in 2022.

Zoopla also reports that 11% of homes for sale in the UK were previously rented out.

Sector can bounce back and become stronger

Neil says the sector can bounce back and become stronger than ever – as long as the right incentives are in place.

He explains: “The private rented sector has been under the government spotlight in recent years and there is no doubt that this may have contributed to some landlords leaving the industry.

“While we welcome measures to improve the quality of housing in the PRS and strengthen tenant rights, we also believe that more could be done to both incentivise landlords to remain in the sector and to attract new investors.”

He adds: “It has been widely discussed within the industry that the reversal of Section 24 may be such an incentive for landlords to remain even with more regulation.

“Being allowed to deduct mortgage payments from rental income before tax would make a huge difference to landlords’ bottom lines.”

‘Landlords are finding life harder’

Along with rising interest rates, tax changes and regulatory reforms, landlords are finding life harder – and less profitable.

Meanwhile, many potential first-time buyers have been priced out of the market by higher mortgage rates and stricter affordability criteria, increasing the demand for rental homes.

This imbalance has led to record-high rents across the country, putting more pressure on tenants and landlords alike.

The PRS currently houses five million households, or 19% of all households in the UK.

‘Government measures criticised by landlords’

Neil warns: “Other government measures criticised by landlords are the proposed changes to the Minimum Energy Efficiency Standards (MEES) regulations.

“By law, all residential rental property must have an Energy Performance Certificate (EPC) rating of at least an ‘E’.

“The government has recently proposed that this be stepped up further to a ‘C’ or above by December 2028.”

He adds: “The measures required to achieve this new standard could prove to be too expensive for some landlords.”

Attractive option for both landlords and tenants

Neil says the government has a responsibility to ensure that the PRS is a viable and attractive option for both landlords and tenants.

As such, it needs to find ways to encourage more investment in the sector, while also protecting the rights and interests of renters.

Among the measures the government could and should consider, Neil says, include:

• Offering tax incentives or subsidies for landlords who provide long-term tenancies or improve the energy efficiency of their properties
• Simplifying the regulatory framework and reducing the administrative burden for landlords who comply with the rules and standards
• Providing more support and guidance for landlords who want to join professional associations or accreditation schemes
• Creating a national register of landlords and agents, with clear criteria for entry and exit, and a system of penalties for non-compliance or misconduct.

He also says that alternative models of renting, such as co-living, build-to-rent or community-led housing, that can offer more choice and flexibility for tenants and landlords should be promoted.

Offering financial support to landlords

He continues: “The UK has some of the oldest housing stock in Europe and the industry believes that the government should give some thought to offering financial support to landlords who might struggle to make the sometimes significant investment required.

“Extensive insulation work and the installation of new heating systems can be prohibitively expensive – especially in those parts of the country where rents are lower, and it would take far longer for landlords to see a return.”

The other factor which has hit the PRS is the lack of available housing stock – especially in places where demand is high, like the major cities.

Neil said: “While house prices are falling, mortgage interest rates remain high, so first-time buyers are having to wait longer to afford them.

“Some workers may never be able to afford to buy their own home, and some of those who could still value the flexibility of renting.

“The demand for high-quality rentals is always going to be there and the government has got to find a way to attract investors who are interested in being the landlords of tomorrow.

“The country desperately needs more, newer, greener homes in the PRS – especially in areas of high population where demand has gone through the roof.”