Reacting to reports that the Chancellor was considering introducing this tax at the Autumn Budget, industry figures said this could result in costs being passed on to tenants or fewer rental homes as landlords exit the market.
Jonathan Stinton, head of intermediary relationships at Coventry Building Society, said while this would be “another hit” to landlords, it would be “tenants who’ll feel the aftershock”.
Stinton said: “The intention may be to target those with multiple properties, yet the costs would likely be passed down, impacting the very people who don’t own a home.”
“A healthy property market needs a strong and competitive private rental sector,” Stinton added.
He continued: “The more landlords are taxed, the less appealing it is to let a property – which could ultimately lead to fewer landlords and fewer rental homes. The simple but powerful forces of supply and demand would then push rents higher, making it much more difficult to rent a home.
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“First-time buyers who are trying to save a deposit while renting could especially struggle and worry that their homeownership dreams are pushed even further out of sight.”
Hitting properties with higher rents
Vann Vogstad, founder and CEO of COHO, said the effect would be felt particularly by landlords with houses in multiple occupation (HMOs) and shared living accommodation.
Vogstad said: “These landlords typically generate higher rental income per property than standard buy-to-let investors, meaning they’ll shoulder a particularly large share of the proposed 8% levy.”
Combined with other tax changes and tighter regulations over the years, Vogstad said this could be the “final straw” for landlords and prompt them to leave the sector.
He added that the “inevitable result” would be a “shrinking supply of rental properties” and “further upward pressure on rents” when living costs were already high.
Vogstad added: “Even those landlords who stay in the market are likely to seek ways to recoup their losses, and raising rents will be the most direct route.
“Tenants always seem to bear the brunt of government efforts to extract more from the rental sector. In this case, HMO tenants could be particularly vulnerable. These properties already face mounting barriers, including growing resistance from local authorities influenced by negative media narratives around shared housing. It would be a real blow to see this vital part of the market unnecessarily eroded.”
Putting people off
Jeremy Leaf, North London estate agent and a former Royal Institution of Chartered Surveyors (RICS) residential chair, said: “The government may feel there is a bit more fat on this calf and can take some of it, but a lot of careful thought is needed. These plans might generate some additional revenue, but at what cost?”
Leaf said landlords were already being “clobbered by tax and regulatory changes”, which “reduced their profits and increased operating costs”, and they were still facing the Renters’ Rights Bill.
He added: “As it is, it is widely appreciated that there isn’t enough rental property on the market, and if this plan to charge National Insurance comes to pass, this extra tax may just be the final straw. This could result in even lower supply, creating less choice, lower standards and high rents, which is what governments want to avoid.”
Leaf said the government might be putting feelers out to gauge the public’s reaction, but “even the rumour of change can be enough to put people off”.
He added: “Buyers may be wondering why they should pay stamp duty now if they won’t have to after the Budget if changes are introduced. This could have the effect of compromising the market. I have already spoken to two landlords this morning who are asking, ‘what’s the point?’ following the National Insurance rumours. Anything that is unsettling and compromises confidence is bad news for the housing market, even if it never actually comes to pass.”
Howard Levy, director of mortgage broker SPF Private Clients, said it was hard to comment without seeing the final detail and it was still unknown whether this could be applied to landlords who hold properties in their own name or those who have limited companies.
Levy said: “While we understand that Rachel Reeves needs to raise money and is looking at all ways of doing this rather than increase taxes, any further cost imposed on landlords will inevitably be reflected in rents. Landlords need to ensure that their business remains profitable, so any National Insurance payment would need to be factored into the rents they are charging – so would in effect end up being paid by tenants.
“The issue with targeting the private rented sector is that landlords’ net yields have already been stretched over the past few years due to taxation changes, higher costs, licensing changes and higher interest rates. Depending on how high the level of National Insurance the Chancellor looks to introduce, we could see many smaller landlords leaving the market. The upshot of this would then be less stock available to rent, which in turn would also increase rents, assuming demand remains the same.”
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