Nearly half (48%) of private residential landlords have indicated that they plan to exit the buy-to-let market, that’s according to the findings of a recent survey by Aldermore Bank.. This could be in protest at a punitive taxation regime and government plans for increased regulation of the industry, with more tenant-friendly legislation planned.
Recent events are only likely to have strengthened their resolve as demands increase to give tenants “rent holidays” if they are unable to pay, due to the spread of the coronavirus crisis. The research carried out by the challenger bank suggests that many small-scale landlords have simply had enough.
The government’s policy of reversing the rising trend of buy-to-let in favour of home ownership among the young, and a drive to encourage institutional investment with build-to-rent, is making small-scale landlords feel decidedly unloved. Institutional investors in professionally managed large blocks of flats, receiving tax incentives, will pose a real challenge to the traditional buy-to-let sector.
The sector has recently been inundated with change: the imposition of a 3% stamp duty premium on rental and second properties; the phased removal of mortgage interest relief; a letting fees ban; restriction on deposits; and this coupled with new energy efficiency and home safety standards; the imminent introduction of electrical safety checks; and the threatened removal of section 21, to name a few, have just been piling up as a massive burden and extras costs.
According to the bank survey, landlords see the burden of regulatory changes as the biggest threat to their livelihoods, followed by the tax burden and the additional costs associated with bringing properties up to the latest energy efficiency and electrical safety standards, not to mention many of the other measures.
The horrendous complexity involved in managing and meeting the more than 150 rules and regulations now affecting lettings, some carrying substantial fines and even criminal penalties, is simply daunting for many, and turning – particularly part-time landlords – off the occupation. Something like 70% of landlords own just one or two rental properties.
Responsible landlords see the changes hitting them hard, when the real target of many of these measures is missing the target altogether; the rogues are still getting away with renting out substandard and dangerous properties, with the result that all landlords are seen as bad in the eyes of the media and the public.
However, every cloud has a silver lining, and with the majority, admittedly by a slim margin (52%) still see the sector as a good place to invest. And with good management they can see opportunities for further investment and growth as others leave the sector.
Aldermore’s managing director of retail finance, Damian Thompson has said:
“Private landlords exiting the UK market would mean less choice and likely impact negatively the quality of rental properties for tenants.
“The number of people renting in the UK has been rapidly growing, up 1.7 million in ten years, so it is vital there is enough rental supply to meet this demand.
“Landlords will need support and advice on how to manage their portfolios going forward from lenders and the wider industry so they can continue to support the private rented sector the way it needs to be.”