22nd
Nov 2016
A UK online lettings agents is warning the private rented sector that tenants unable to pay their rent is set to rise sharply over the next year. However the firm is not pointing the finger of blame towards tenants but at the government's tax hikes which will cause a knock on effect of landlords having to raise rents.
Besides the stamp duty increase, the one government policy that will cause the biggest increase in rents is the phasing out the mortgage interest against tax which is due to start from April 2017.
Tax experts are saying that by April 2020, many landlords will only receive 50% of the relief that they achieve now, so rents will have to be increased.
The online letting agent forecasts that there will be an upward trend of tenants unable to pay their rent, as recent government data shows that already 10% of private renters fell behind with their rent in August, resulting in 34,000 landlords issuing possession claims in the following month.
The CEO and founder of the online lettings agent, James Davis, said: “Rent arrears are becoming the fastest-growing problem for landlords, as well as tenants across the UK, and this will no doubt be their biggest issue in 2017.
“Not only have investors had to contend with the new 3% stamp duty surcharge this year, but from April 2017, they are also facing plans to prevent landlords deducting mortgage costs from rental income and limiting tax relief on mortgage interest payments. These increased landlord costs will only make matters worse, especially for tenants who in some of the most expensive areas, such as our capital, are paying up to two thirds of their salary on rent.”
He added: “The chancellor needs to think carefully about the damage that is likely to be done, primarily to tenants, particularly if people are relying more on the lettings market than the sales market going forward in the wake of Brexit.
“Over stretched landlords will try to recoup these additional taxes by increasing rents, but if wages struggle to increase more than inflation, landlords will struggle to secure rises, putting the entire lettings financial model at risk.”
Richard Merrick of PIMS, said:" There has been some media coverage of the new Benefits Cap and the housing allowance, however there is nothing about how the reductions are going to help tenants pay their rents and once again landlords will be cast as the villains of the piece."
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