Are you increasing your rents?

Posted: 14th Oct 2017

Landlords of buy to let property have been under increasing financial pressure in recent years.

Probably the biggest challenge to running a profitable business has been the effective increase in taxation, following the decision to abandon tax relief on mortgage interest repayments paid by landlords.

But other regulations, such as an increase in Stamp Duty, changes to the tax allowance on expenses for wear and tear, and a general tightening up by the Bank of England’s Prudential Regulation Authority on the lending criteria for buy to let mortgages have all weighed heavily on the ability of buy to let landlords to run a profitable business.

Licensing of let property by local councils is also becoming more widespread and adding further administrative burdens on even reputable and responsible landlords.

The additional costs – together with the normal overheads of maintenance, letting agency fees and let property insurance – are likely to have left landlords with little choice but to increase rents.

The most recent spur to such increases may be the announced intention by government opposition leader, Jeremy Corbyn, at the Labour Party conference to reintroduce some form of rent controls in the private sector. Despite conflicting view on whether rent controls are ultimately to the benefit of tenants, and others who support the concept, many landlords may be encouraged to increase rents now, in anticipation of any controls in the future.

Our landlords’ insurance survey

A rise in the number of private sector landlords already looking to increase rents is a trend confirmed by a survey recently commissioned by ourselves here at Cover4LetProperty.

Our press release of the 21st of August 2017 reveals that almost a third of all buy to let landlords we canvassed are planning to increase rents within the next 12 months or so.

The reasons appear to be all about the environment in which landlords now have to operate rather than anything to do with the tenants themselves. The overwhelming majority of landlords (92.55%) said they were happy with the tenants they had, whilst only 1% said they were unhappy, and 6% responded that they felt “50/50”.

Although they gave no indication of the scale of increases likely to be made, the overwhelming reason given by landlords for the need to increase rents was the additional tax burden imposed by government. Other concerns included uncertainties over Brexit, the burden of increased regulations and “interference from the local council”. The prospect of some form of government rent control, of course, may well prove the final straw.

All in all, therefore, it may come as absolutely no surprise that one respondent we asked commented that the role of a landlord had become “more complicated now than when I started”.

Buy to let portfolios

Given the uncertainties in the overall buy to let market, it may also be little surprise that relatively few landlords reported any intention of increasing the size of their buy to let portfolio in the coming year.

A significant 83% said they had no such intention, with only 14% expressing any plans to increase their buy to let property holdings.