The government’s proposal to “redress the balance” between landlords and their tenants could be the final straw for some landlords, in what is already a challenging sector, KIS Finance has warned.
With interest rates being raised to their highest level in 13 years, and the cost-of-living crisis continuing to hit hard, many of England’s 2.4 million private landlords are coming under increasing pressure as they try to maintain a viable business model.
The impact of the latest hike in interest rates will see those on variable rate or tracker Buy to Let mortgages facing increasing costs, which may lead some to question the financial viability of their business.
Whilst some landlords may look to increase rents to cover their additional costs, the new proposals commit to ending arbitrary rent review clauses and will give tenants more power to challenge rent increases.
In addition, Landlords will be required to give twice the length of notice for a rent increase than is currently required and tenants will have more power to challenge any increases if they feel they are unjustified.
Whilst the aim is to protect tenants, the concern is that landlords may struggle to cover their own increasing costs and deter them from remaining in the market.
KIS managing director Holly Andrews said: “The rental market has never been so competitive, with the demand for rental properties outstripping supply.
“Whilst the new proposals are designed to protect tenants, there is a danger that certain aspects may deter new landlords and persuade others to leave the sector.
“Ironically, this may cause even greater upward pressures on rents, as the supply of rentable properties could reduce.
“Landlords are not exempt from the impact of the cost-of-living crisis and are facing their own pressures as they try to make ends meet. Coupled with the latest interest rate increase, which will see the cost of borrowing increase for many, there are serious concerns on whether we will see a steady increase in the number of landlords leaving the sector.
“As tenants seek to secure their own position, the sector has seen a 36% increase in the number of enquires for energy bills to be included in the rent.
“Understandably people want certainty, but few landlords are likely to be prepared to take on this risk themselves and add to their costs in this way.
“If the proposals don’t adequately balance the needs of landlords along with their tenants, there is a serious risk that it could in fact exacerbate the current housing crisis”.
