Meera Chindooroy, deputy director of campaigns, public affairs and policy at the National Residential Landlords Association, says: “Over recent years, the impact of the loss of mortgage interest relief has had a big impact on landlords.
“Landlords who were completing their tax returns in 2021-22, would have seen the full impact of that change, just as interest rates were also getting much higher. So the two together have meant that it has become quite a lot more expensive to be a buy to let landlords specifically.”
Some landlords have instead bought properties as a limited company, which only pay corporation tax on profits. Mortgage interest payments are also tax deductible for a company.
Hamptons said a record 50,000 landlords set up buy-to-let companies in 2023, but the overall proportion is still small. UK Finance says only 10pc of buy-to-let mortgages are held by landlords who have set up as companies.
Since 2016, landlords have been selling more properties than they are buying in Britain, according to Hamptons. Private landlords accounted for 16pc of all sellers in 2022, the first year in which the mortgage interest tax relief was fully removed.
Hamptons estimates that a further 146,060 homes will be sold by private landlords across Britain this year, offsetting the 113,630 new buy-to-let purchases in 2024 and will likely mean that private landlords will have sold 328,750 more rental homes than they’ve bought since 2016.
The new Labour government has also refused to rule out raising capital gains tax, which will eat into the profit landlords could make from selling their home. Capital gains tax protections have already been slashed under the Conservatives, standing at just £3,000 a year today – down from £12,300 a matter of years ago.
Increasing red tape and regulations
Landlords say the amount of paperwork and regulatory hurdles they must get through to rent a property has also affected their desire to remain in the sector. There are over 170 pieces of legislation that landlords need to adhere to, with local authorities responsible for enforcing most of these regulations.
France says: “When I’m renting a property now I’ve got about ten pieces of information that I’ve got to send to a tenant, from GDPR, to risk assessment for fire, to more regulations around mould, as well as the tenancy agreements and the EPC certificate, electrical certificate and the gas certificate. It’s just a plethora of stuff that you have to send out to people now.”
He adds that this year the Government introduced new “right to rent” immigration regulations, that require landlords to get a “share code” – a nine-digit code generated by the Home Office – for those who are not British or Irish citizens, rather than just checking their passport and an employment reference.
In 2020, new rules also came into force in England requiring landlords to get an electrical safety inspection of their rented property and provide tenants with the report, or else could be fined up to £30,000.
Bland says: “The costs are just sometimes not viable. In Wimbledon, we have many old properties, some of them are period or listed buildings, and it sometimes costs tens of thousands of pounds to upgrade them, and get new circuit boards and low energy lighting.”
Landlords also expect Labour to bring back the Conservatives’ abandoned plan to make all rented properties have an energy efficiency rating of C or above by 2030, up from the current minimum E rating.
Such a rule would require many landlords to invest in smart meters, new lighting, extra insulation, double glazing and a-rated energy efficient boilers to reach the minimum standards. The mortgage broker Habito estimated that it would cost around £6,000 on average to bring a property from an E to a C rating.
Richard Donnell, research director at property site Zoopla, says: “The next big thing on the horizon that’s really going to lead to another round of selling up from landlords is minimum energy standards for rented housing in 2030.”