The Mass Exodus of Private Landlords

The media reports that private landlords are leaving the industry in a mass exodus.

As mortgage rates rise and new regulations are announced, such as the rent reform bill and EPC Certification upgrades, many feel it is time to jump ship.

What does the future hold for those left in the industry, such as me?

Rent & Tax Reforms

In every industry or workplace environment I have been involved with, I always hear the same adage “The job’s not as good as it used to be” This comment typically comes from the ones who find it hard to accept change and have probably gotten away with more in the past than they do today. The same has happened in the private rental industry.

The party ended for the old school landlords wanting to make a quick buck when the government stopped the ability to claim mortgage interest payments against income, a 3 per cent surcharge on stamp Duty (SDLT) and removed the 10 per cent wear and tear allowance. A friend of mine, who had benefited from the tax relief for years, sold her portfolio of properties in a rage. I picked one up on the cheap and have gained a capital appreciation of over 100% since the purchase. Unlike my friend, I had not benefitted from years of tax relief and found the hit easier to take.

Then came the regulations. With each news report or tv program about slum landlords that demonised all private landlords collectively, it was evident that the government had to step in to regulate the industry and simultaneously try to attract some labour supporters.

With every passing of a new bill, many feel the power goes more into the tenants’ hands, taking away profits and flexibility from landlords who want that hassle-free life.

I take my responsibilities as a landlord seriously. As a landlord who has always tried to set an example within my chosen industry, I welcome every regulation passed. I was compliant anyway, so there was nothing to worry about.

For those trying to stay compliant, we now struggle to battle higher interest rates. The banks are forcing landlords to raise rents or fail stress tests. If a landlord fails these stress tests, it’s no new mortgage (the computer says no). They either sell up or sit on the bank’s high variable rate and are forced to increase rents anyway. This then opens them up to more abuse by the media, who don’t look at the underlying effects of inflation on the industry.

Is Now The Right Time?

Is this the right time to introduce reforms and tax changes encouraging the private landlord to walk away? There is an obvious need for cheaper housing, especially in this inflated economic environment we currently find ourselves in, and an obvious need for privately rented accommodation now the councils have sold their council houses.

It’s basic economics that if there is less supply than demand, prices will rise, and quality will fall.

My research shocked me at the lack of stock and prices of rental properties available to let in certain areas. With every advertisement, I could see dozens of comments begging for the property, which looked overpriced and dated, something you would not have seen as much pre-pandemic, where the ball was more in the tenant’s court. Government intervention is not working currently; it hurts landlords, renters, and the economy.

With few choices for the renter, the only thing that can be done is to ask the boss for a wage rise, thus fuelling a wage spike spiral that creates more inflation.

Many believe the greedy landlord is profiteering in these challenging times, but with higher interest rates, more regulation and failing bank stress tests, the landlord is also left with little choice but to make a loss or sell up, which adds to even less supply thus fuels a destructive spiral of events.

What Am I Doing?

I want to be an example of an excellent private landlord and spread the message that not all landlords are greedy, profiteering, and inhuman to the needs of their tenants. I consider all factors, especially the needs of my tenant when I need to make a change in the tenancy. My properties are rented for much less than the market value.

I cannot raise the rent too much, or my tenants will suffer, but I cannot make a loss or fail bank stress tests. So, I need to work hard to get the balance right, but that balance is getting harder to find all the time, and others are struggling too.

As I stated above, I welcome regulation, especially regarding safety. but, the government also needs to work with the private landlord to stop the spiral of events that could crash a whole industry and economy.