The government has in the last couple of years introduced a raft of changes that impact on landlords. They have changed how mortgage tax relief is dealt with, they’ve changed the allowances for repairs and maintenance and they have modified stamp duty.
The main reason for this was that they felt private landlords and buy-to-let landlords were possibly benefitting from the existing system more than were owner-occupiers. Like most Conservative governments their instincts are very strongly in favour of owner-occupation and they felt that the rise of buy-to-let was making it more difficult for people to become owner-occupiers.
Another problem the government is concerned about is that the rise in buy-to-let landlordism might make the market more volatile in that if the housing market turns down or runs into difficulties such as interest rate rises, a lot of landlords will sell out and leave the sector rather quickly.
“People are not accessing owner-occupation anything like the way they were and they’ve got to live somewhere.”
Buy-to-let and more generally private landlords may not enjoy the most positive public image but they are very necessary. People are not accessing owner-occupation anything like the way they were and they’ve got to live somewhere. Most buy-to-let landlords provide reasonable quality accommodation at market prices.
We published The Profile of UK Private Landlords in December for the Council of Mortgage Lenders, and what it showed was that landlords are mainly people who are looking for a comfortable income for their pension. The majority of landlords want to keep their tenants and therefore want them to be comfortable. Every time they have to change a tenant, it costs them money – why would they want that?
The average size of a buy-to-let landlord’s portfolio is two, although the number of landlords who have five or more properties has been rising. To an extent they are competing with owner-occupiers but I’m not sure how strong that argument really is. A study by Countrywide found that there are very few instances where people from both sectors are bidding for the same property.
Will the government’s changes have a notable effect on the housing market? Issues like if and when interest rates are going to rise will probably have a far bigger effect. However, there are buy-to-let landlords who are standard-rate taxpayers who may find they are now getting very much lower returns than they had been expecting and it is possible they may sell out – but probably mainly to other landlords.
One change that did have an immediate impact was the rise in stamp duty last April, which significantly reduced the number of buy-to-let purchases. However the numbers were going up very quickly before that, so whether it has yet decreased in net terms is unclear.
It is to be hoped that there may be more housing legislation coming regarding how some landlords’ agents behave. I would say on the whole, the changes this government has introduced since the change in the make-up of government last year are more focused on trying to develop a coherent tenure policy which regards private renting as part of the picture and wants it to work better.