Budget measures 'may drive up rents'

by Gary Whittaker

Measures announced in the government's latest budget could lead to higher rents in the private rented sector (PRS).

This is according to the Residential Landlords Association (RLA) and the Scottish Association of Landlords (SAL), which have accused the chancellor of creating uncertainty within the rental market.

George Osborne has revealed mortgage interest relief will be restricted to the basic rate for landlords. HM Revenue and Customs has predicted 20 per cent of landlords will be affected by the change, however the RLA and SAL has warned many of these will own more than one rental property, meaning the impact of the new measure will be much more far reaching.

The organisations pointed to research from PwC that has warned buy-to-let investors could push up rents in order to compensate for the increased mortgage interest they will have to pay. 

RLA Chairman Alan Ward stated: “The RLA will look in detail at the government’s measures, but on the face of it the impact could be to push up rents as landlords have to recover their extra costs.

“HMRC’s impact assessment is scant on detail. The reality is that this measure will hit many more tenants than landlords."

He called on the government to reconsider its plans and to hold an open consultation to develop a better understanding of exactly what the measures would mean for the PRS.

The RLA and SLA's stance has been supported by the Institute for Fiscal Studies, which has described the treasury's assessment of the rental sector as "plain wrong".

According to the government, current tax rules provide greater support to buy-to-let investors than standard homebuyers - something the new measures aim to address. However, the IFS said this is not the case, with the real underlying issue a lack of housing supply, which is pushing up property prices and rents.

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09-July-15Property Management