By Political Insight Director, Suzanne Evans
News that UK rental prices have hit a 13-year high is a classic example of unintended policy consequences. According to online property sales website Zoopla, rental prices now stand an average 12% higher than pre-covid, meaning renters are now paying around £62 more per month. The average rent now accounts for 37% of gross income for a single earner. Why? Zoopla says a major factor in the rental price hike is that the supply of rental properties recorded in January 2022 stands 39% below levels typically observed at the start of the year, mainly because of the shrinking stock of homes for rent, because of a decrease in buy-to-let investment over the last five years.
Zoopla isn’t wrong. Owning a buy-to-let investment or two isn’t as attractive as it once was. In the past five years, landlords have faced a veritable blizzard of tax hikes and red tape, all of which has been designed ostensibly to protect tenants and help them buy their own home, but which has made life very difficult for the smaller landlord, at least. Anyone buying an additional home in their own name has been required to pay an additional 3% stamp duty on the purchase price since 2016, the same year in which George Osborne ruled individual landlords would no longer be able to claim tax relief on mortgage interest payments. Taxation therefore switched overnight to being levied on turnover, rather than profit. Landlords were then required to do the job of immigration officials via legislation requiring them to check their tenants’ right to reside in the UK, with an unlimited fine or a five-year prison sentence the penalty for non-compliance. Then lettings agencies were banned from charging fees from tenants, so there was another cost that had to be borne by landlords instead. The chickens have now come home to roost: the government was warned these policy changes would force landlords out of the market and lead to higher rents, and here we are.
The future looks even more bleak. Before the pandemic, in 2019, landlords had to comply with at least 156 separate regulations before they could legally let out their property – a 32% increase on 2010. That red tape has only got worse since and it looks set to get worse again. Until the end of March this year, landlords are still banned from evicting even rogue tenants who deliberately default on their rent, under emergency pandemic legislation. In this way, landlords have become an extension of the welfare state, one the government will not compensate them for. In a devastating blow, many individual landlords found they could not claim self-employment coronavirus support because income from property isn’t classed as self-employment. Anyone whose sole income came from residential lettings got nothing.
And still the onslaught continues: the government is looking at forcing landlords to make rented accommodation more energy efficient, at an average cost of £4,700 per property unit, according to one study [1], and to prevent landlords refusing to accept tenants with pets. [2] It is difficult not to conclude that past governments have deliberately targeted a group for whom, let’s be honest, the public has little sympathy, as a scapegoat for its own policy failures – notably on immigration controls and affordable homes – which has driven a housing shortage. It is little wonder landlords have quit the market in droves.
Our message to business: When the government introduces new policies, there will always be consequences, perhaps significant consequences. A single piece of damaging new legislation or budgetary change may quickly force profitable and popular businesses into debt, even bankruptcy. On the other hand, a positive shift in strategy may unlock innovation and access to new markets. Businesses need to be clued up on what the government is planning, and how to lobby effectively against change likely to be detrimental to business, and that is our aim at Political Insight. We can help you foster good working relationships between your organisation and politicians, governments, and key decision-makers, so legislation is aligned with your commercial success, and your interests and investments are protected.