Jeremy Hunt and the rental housing crisis

As the leading platform for buying and selling investment property in the UK, Vesta Property put out a press release last week to encourage Jeremy Hunt, Chancellor of the Exchequer, and the government to consider the impact of their policies on the wider rental market and the environment as they prepare for their next budget announcement.

With over £300,000,000 worth of buy-to-let properties on the platform we are well-placed to provide a view. Many private landlords are exiting the rental market due to the removal of tax benefits for buy-to-let landlords, substantial costs relating to environmental regulation, higher interest rates, and increasing maintenance and compliance costs that make owning a rental property less economic. 

We highlighted to the government that to avoid the looming crisis of more landlords exiting and creating a significant drop in available rental property, it is imperative that it considers the needs of both renters and property owners in its next budget announcement, restores the deduction of interest on mortgages and extends the deadline for landlords to meet the proposed EPC energy improvements for buy-to-let properties. The lack of mortgage interest relief for directly owned properties is a big factor, and as other issues increasingly make buy-to-let investment uneconomic, many landlords are left with no option but to sell their properties.

The change in mortgage tax relief regulation, commonly referred to as the "Section 24" or "Tenant Tax", was implemented by former Chancellor, George Osborne. The regulation was introduced in 2017 and phased in over a four-year period, limiting the tax relief private landlords can claim on mortgage interest payments on their rental properties. The main objective of this policy change was to supposedly reduce the tax advantages enjoyed by buy-to-let landlords, which the government argued created an uneven playing field for first-time buyers and made it harder for them to get onto the property ladder. The policy was also intended to address concerns that the previous tax system had contributed to a housing crisis by encouraging people to invest in rental properties rather than their own homes.

But now faced with onerous new landlord obligations, the need to invest in properties to make them EPC C+ compliant, rising mortgage costs, and increased maintenance costs, many landlords have found they cannot increase rents to recover increased costs with the result that the rent is not covering the costs of ownership, making it difficult for them to continue operating in the buy-to-let sector.

It is vital that the government supports the development of the rental market and addresses the failure of "Section 24" to maintain the balance of quality housing for all individuals and families. They must acknowledge the need for a balanced housing market, with options for those who wish to own property, those who prefer to rent, and those that need to rent before they can afford to get on the housing ladder. It is very clearly part of the solution to address the looming housing crisis!

In addition to supporting the rental market, it is also essential that the government supports landlords who want to invest in and improve their rental properties. Retrofit initiatives that support the government's net-zero targets will make the properties warmer and more energy efficient for tenants. The current lack of tax relief for mortgage interest means landlords are less likely to borrow money to make these changes and more likely to sell properties, which is not good for renters. 

The government must incentivise landlords to invest in their properties and implement green initiatives by providing tax relief for landlords who undertake retrofitting projects. These initiatives will not only improve the quality of rental properties and living conditions for tenants, but they will also contribute to the UK's overall goal of achieving net-zero carbon emissions.

With a greater focus on supporting landlords who invest in their assets and implement green initiatives, the UK's rental market can continue to grow, ensuring there are more good quality energy efficient homes available for renters and the government can make progress towards their net-zero carbon emission goals.

At Vesta Property, we are committed to providing our customers with a robust and efficient marketplace for buying and selling rental properties. We believe that the UK property market offers many opportunities for investment and growth, and we are here to help you navigate these opportunities and make informed decisions on the properties you want to buy or sell.