A large proportion of landlords expect to raise rents to offset the impact of higher taxes and regulatory costs, according to new research from Pegasus Insight.
The research found that 64% of landlords would consider increasing rents to recover additional costs. It also suggests that changes affecting the private rented sector could influence which tenants landlords are willing to accept.
The findings come ahead of the Budget on 28 October, with Pegasus Insight calling on the government to avoid introducing further financial pressures on landlords.
Previous research from the firm found that some landlords had responded to tax and regulatory changes by selling properties, moving their portfolios into companies or putting investment plans on hold.
Concerns Over Court Capacity
Landlords are also expressing concerns about whether the courts will have enough capacity to deal with possession cases under the changing rental rules.
Mark Long, founder and director of Pegasus Insight, said the issue should be considered by policymakers as the new possession process will rely heavily on the court system.
He said landlords need confidence that cases can be handled efficiently and warned that further increases in taxes or other costs could influence landlord decisions.
According to Long, this could eventually affect tenants through higher rents, less choice and a smaller supply of rental homes.
Tax Changes Add To Landlord Concerns
The firm’s Landlord Trends research found that 88% of landlords were concerned about the proposed 2% increase in income tax rates on property income for properties held in personal names.
This was three percentage points higher than the previous quarter.
When asked how they would respond to increased costs, nearly two-thirds said they would consider raising rents to recover the additional expense.
Landlords are also becoming more selective when choosing tenants. 83% said tax and regulatory changes would affect the types of tenants they were prepared to let their properties to.
The potential impact of the Renters’ Rights Act is another source of concern. 91% of landlords surveyed said they were very concerned about possible delays in the courts when trying to regain possession of a property.
Tenants Already Seeing Higher Rents
The pressure is also being felt by tenants.
Separate Pegasus research found that the average tenant currently pays £917 a month, which is 11% higher than a year earlier.
Among tenants who had remained in the same property for at least 12 months, 46% said their rent had increased during the previous year.
Tenants were also asked how they expected rents to change as landlords faced the costs associated with complying with the Renters’ Rights Act.
More than a quarter expected rents to increase as landlords passed some of the additional costs on to tenants, while only 9% expected rents to decrease.
What Could This Mean For The Rental Market?
The research suggests that rising costs could influence landlord behaviour ahead of further changes to the private rented sector.
If more landlords increase rents to cover higher tax and compliance costs, tenants could face further increases. Others may choose to sell, delay investment or become more selective about who they rent to.
With the Budget approaching, landlords and tenants will be watching closely for any further changes that could affect the cost and availability of rented homes.
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