PRS could be damaged beyond repair warns industry body

The lack of housing supply is creating huge problems in the private rented sector, an industry body has warned.

The Association of Independent Inventory Clerks (ACII) blames the Renters Reform Bill and energy efficiency proposals for creating “the perfect storm in the rental market.”

With more and more landlords leaving the private rented sector, many renters will be left in limbo trying to find a place to rent.

Nobody knows where the new landlords are going to come from

Daniel Evans, chair of the Association of Independent Inventory Clerks, says: “Nobody knows how many landlords have left or are about to leave.

“One large firm of accountants, analysing HMRC data reckoned 70,000 landlords exited the private rented sector (PRS) in 2022 and it looks as though the situation is getting worse.

“Every single company that supplies the sector is going to struggle because too many landlords are leaving or have already left, and nobody knows where the new landlords are going to come from.”

Profits have been squeezed for many landlords

Mr Evans believes that one of the biggest barriers to landlord recruitment is the changes in tax regulation.

Since April 2020, all buy-to-let landlords have had to pay tax on all their rental income although they do receive a tax credit worth 20% of their mortgage interest payments.

He says that the government should rethink their tax policy on landlords.

“The first thing the government should do is U-turn on that tax policy. Landlords should be able to offset all their mortgage costs against tax.

“The new rules mean that landlords who pay higher rate tax have had to pay substantially more and some who were in the lower band have been pushed into paying the higher rate.

“Profits have been squeezed for many landlords and high tax rates aren’t going to attract new ones.”

EPC rule changes

Mr Evans says the other problem is that the energy efficiency requirements have not yet been published.

Though the plans have not been made into law, ministers have previously proposed that by April 2025, newly rented properties in England and Wales will need to meet a minimum EPC standard of C – tougher than the current E standard.

The regulation is also slated to apply to existing tenancies from 2028.

He says many landlords will have already left the PRS due to the proposed changes.

Mr Evans says: “The problem here is that a lot of landlords who were worried by this rule change may have already sold up and left or are in the process of doing so,”

“Any slight relaxation of the rules now isn’t going to tempt new landlords in. We have to face facts a lot of our housing stock is old and needs improvement to save energy.

He says the government should be offering financial incentives to landlords to help improve older housing stock which may need energy-efficiency improvements.

“There should be some financial support to achieve these targets. If that was in place, the sector might look more attractive.

Landlords have been made to feel like they’re public enemy number one

Mr Evans says the government needs to build more energy efficient homes to entice new landlords into the sector.

“The bottom line is that we’re not building enough houses. If more rentable homes were built and they already had the energy efficiency standard, then more landlords might consider buying them if they could see a decent return on their investment.

He added: “Landlords have been made to feel like they’re public enemy number one and, for the vast majority of them, that’s totally unfair.

“The PRS is a vital part of the country’s overall housing strategy, if we’re not careful, it’s going to be damaged beyond repair.”