When tax changes were announced last year, landlords in the private rental sector were quick to say they would withdraw from the sector. This is not an unusual reaction and has been said many times over the last 20 years.
Every major change has been greeted with the same reaction:
Single Room Rents – we’ll withdraw.
Housing benefit paid to the tenant, without allowing the landlord to say the rent must be paid direct to them – we’ll withdraw.
Universal Credit, with all benefits paid in one lump to the tenant – we’ll withdraw.
These threats were not, for the most part fulfilled, but now there appear to be developments that show these are not empty threats. Landlords are taking steps to ensure that they will not be caught out by plans that would increase their tax bills.
Research carried out by the RLA found that homes which previously had been for standard letting in the private rental sector have been taken off the market and offered as holiday lets on sites such as Airbnb.
They found an increase of 75 per cent in the number of multi-listings on Airbnb between February 2016 and March 2017. As ‘multi-listings’ indicate individuals who are offering more than one property on the site, this is clearly appealing to professional landlords, the mainstay of the private rental sector, which has been a vital part of provision for the most vulnerable. This raises serious concerns about the supply of housing that will in future be available.
There has also been an increase of 23 per cent on the number of properties advertised as available for more than 90 nights between February 2016 and March 2017. These stays should be limited to a maximum of 90 nights, otherwise planning permission is required. Airbnb said at the start of 2017 they would crackdown on this; the success of this crackdown can only be guessed at, given that in March there were still advertisements for periods in excess of 90 days.
The RLA survey of 1,500 landlords found that 7 per cent now only offer properties as holiday or short term lets. If this was representative of the sector as a whole, this would mean that a minimum of 134,400 properties would move from the private sector into holiday/short term accommodation. This figure is likely to increase as landlords in areas with high demand for holiday accommodation choose to ignore their previous tenant group in the private rental sector for lets which they will see as not only easier to manage but also with a higher rental income.
36 per cent of the landlords surveyed blamed the tax changes, where landlords will be taxed on their income, rather than the profit element; and the reduction in tax relief so that only basic rate tax will be available, irrespective of the actual rate of tax paid. One landlord said ‘I didn’t want to do this but the tax changes have forced me down this route. Selling is not an option due to Capital Gains Tax and this iniquitous tax which is effectively retrospective is unjust in that my buy to lets are a business, just like any other. There will be fewer properties available to rent as a result of this tax’.
The housing market has already been described as ‘broken’. Perhaps further expansion in Airbnb and similar services, to the detriment of the private rental sector, will be the means by which it is irretrievably smashed.
For advice on buy to let issues – Ask Sharon