Our Director Adam Kingswood believes unless changes to the above initiatives are rolled back, increases in rents are inevitable. The company has consulted with Nottingham City Council asking them to reconsider their plans to introduce selective licensing.
Adam comments: “Landlords across the country are facing changes that will result in increased costs. This will result in either landlords passing this increase onto tenants or in them selling their properties therefore reducing the number of properties available to rent. This lack of supply will also result in increased rents. Whilst landlord tax relief and the stamp duty surcharge are national issues, Nottingham City Council’s plans for selective licensing add fuel to the fire and I ask them to reconsider the proposal for a much more realistic and targeted scheme to achieve their objectives of improving housing standards in Nottingham’s private rental sector.”
In November 2016, Nottingham City Council announced they would be consulting on plans requiring all Nottingham City private landlords to have a license to show that they and their properties met its required standards. The license is set to cost £3600 per property for five years, with a discount of £3140 for accredited landlords and could be introduced in Spring 2018 if the Council decide to introduce the scheme. For professional landlords with a portfolio of properties, this is a high additional cost which is likely to be passed onto tenants through increased rents. For ‘accidental landlords’, those who may have just one buy-to-let which they may have inherited or formally lived in, it could result in them deciding to sell the property.
This is especially likely when the impact of changes to mortgage interest tax relief are taken into effect. From April 2017, landlords will start to lose the right to deduct mortgage interest from their rental income at the rate they pay income tax, currently up to 45%. This will be replaced with a 20% tax credit. For landlords paying higher rate tax this could result in up to a 90% increase in tax.
For example, previously, a landlord receiving £310,000 a year in rent but paying £39,000 a year in mortgage interest would only have to pay tax on £31,000. This is set to be rolled back gradually up to 2020 where the full amount will be taxed, less a 20% credit. This means that a higher rate tax payer would face a huge increase in tax which is likely to result in many leaving the market.
Adam adds: “The changes introduced by the Government were intended to free up housing stock for first time buyers. However, in reality they are going to result in fewer rental properties and rents increasing which would make it harder for people in rental accommodation to save up to buy their first home.”
“The private rented sector is a vital part of the housing market in Nottingham, essential for temporary staff at our city’s hospitals, universities and large employers. Amidst national changes to the marketplace, Nottingham City Council’s selective licensing fee will certainly cause some landlords to no longer provide a service.”