The trade body argued that measures which discourage investment in the private rented sector will affect the availability of properties to rent which will drive up the cost to the tenant.
In the summer Budget, the Chancellor slashed the tax relief that private landlords receive on their mortgage interest payments, cutting it from 40% or 45% to 20% by April 2020.
In its report, Segmenting the UK mortgage market, IMLA said that the higher tax burden for landlords, which would cause some to make a loss after tax, would reduce the price landlords would be prepared to pay for a property giving owner-occupier house hunters a better chance of getting their hands on the property.
This teamed with the threat of regulation from the Financial Policy Committee (FPC), which is monitoring activity in the buy-to-let market to watch for signs of overheating, may damage the supply of homes to the private rented sector even further.
The FPC first voiced concerns over activity in the buy-to-let market during its policy meeting in March when members discussed the increasing number of interest-only mortgages in the sector and agreed to monitor the trend.
Since then the committee has held firm on its view that the market should be monitored in light of what it called the risk of ‘looser underwriting standards’ but minutes from September’s policy meeting revealed it was not planning to act at present.
IMLA believes the combined pressures of the increased tax burden and the threat of regulation poses a greater risk to tenants than landlords’ behaviour.
A small segment of the buy-to-let market is due to be regulated by the Financial Conduct Authority in March next year when the Mortgage Credit Directive comes into force. To comply with the directive, buy-to-let property owners who did not initially purchase the property as a business investment will be classified as consumer buy-to-let applicants and will be subject to more rigorous underwriting checks. This has caused some in the industry to speculate that is the start of regulatory creep into the sector.