Some Proposals to Prevent a Possible Rental Crisis

Speak to tenants and landlords regularly - as we do in the course of our work supporting both - and you will soon realise that the UK is on the edge of a renting crisis. Some landlords are finding themselves in the position where they must raise rents or sell up if they are to avoid losing money on their property. Tenants are paying an ever larger percentage of their income on housing costs.

Something needs to be done! Here’s a few proposals that the government should be considering.

Tax Reform

The government should rethink the damaging tax policy Section 24 of the Finance (02) Act 2015 that was fully implemented in the 2020/21 tax year. This landlord tax means rental profits are taxed with a maximum deduction for finance costs of 20%. Frankly, the introduction of this tax saw an exodus of small landlords from the property market. The reduction in the supply of rental homes is driving up rents. Reforming these taxes could keep more landlords in the market: more homes available to rent would have a stabilising effect on those rising rents.

Incentivise Long-Term Tenancies

Beyond tax reform, fostering stability within the rental sector is paramount. Providing incentives for landlords who offer long-term, secure tenancies could help create more stable housing for tenants and keep rents in check. This could take the form of direct grants for landlords who commit to multi-year leases. By encouraging longer tenancies, we can reduce the churn of tenants, minimise void periods, and create a more predictable and stable rental market. This benefits both landlords and tenants, fostering a sense of community and security.

Build More Affordable Homes

Ultimately, the UK needs more affordable homes – both for rent and for sale. The government should prioritise the construction of affordable housing to increase supply and reduce competition for available homes. This requires a concerted effort to streamline planning processes, unlock brownfield sites, and invest in social housing. We’ve heard lots of bold claims regarding this from the Labour government, but they will likely be judged on their achievements in this area at the next election.

Support Small Landlords

Instead of pushing small landlords out of the market, the government should offer grants and incentives to help them stay in business. Since the diminution of the social housing model from the 1980s onwards, small landlords have become the backbone of the rental sector, providing vital housing stock to local communities.

Incentives could include grants for energy efficiency upgrades, assistance with compliance costs, or even something more radical like tax breaks for landlords who offer below-market rents to key workers.

The current trajectory of the rental market is unsustainable. Without decisive action, we risk creating a housing crisis that will impact generations to come. By implementing these proposals, the government can create a fairer and more stable rental market that benefits both landlords and tenants.

Pearl Lettings supports landlords by managing their properties and finding suitable tenants. We understand the challenges faced by both landlords and tenants in the current climate. For more information about our services, please call our office on 01603 980770 or email hello@pearllettings.co.uk