The war on landlords has backfired – and Britons are paying the price

Rents were rising at a rate of 17pc a year ago, and it’s fair to say the nation’s animosity towards landlords has grown at a similar pace.

Rental inflation has since slowed to less than 10pc, but Londoners alone spent £32bn on rent this year. And as a result, landlords have become the bogeymen of modern times. 

It is landlords who have borne the brunt of the country’s angst in the face of a housing crisis. This is despite new homes in England being built at an annual rate of 234,400 – well below the Government’s 300,000 target – and the country’s rental supply having not budged in over a decade.

But as homeless charities and councils will tell you, squeezing out the “bad” landlords has squeezed out the good ones too – ones they have relied on for decades.

Tax raids on property investors began in 2016, with the introduction of a 3pc stamp duty surcharge on second homes. This was shortly followed by the tapered removal of mortgage debt tax relief in 2017.

More recently, the threat of “no-fault” evictions and expensive energy performance improvements have made buy-to-let seem like a far riskier investment.

The Government has come under pressure from landlord MPs as a result, leading to a pause in new eviction legislation and the scrapping of energy performance targets.

Jasmine Basran, head of policy at homelessness charity Crisis, told The Telegraph: “We often work with landlords to support the homeless, and we’ve always had landlords willing to work with us and lower the rent slightly.

“But now, we’re increasingly seeing landlords say they want to but can’t. They just can’t make the numbers work anymore.

“This is creating pressure in areas we didn’t previously see. In Newcastle, our hotline is no longer able to provide accommodation to everyone. As a result, more people are falling into temporary council housing or becoming homeless.”

The temporary housing bill has rocketed for councils. The number of households living in temporary accommodation has risen by 89pc over the past decade, to 104,000 households at the end of March 2023 – the highest figures since records began in 1998.

This has cost England’s councils at least £1.74bn in the last financial year, according to the Local Government Association (LGA).

Nottingham City Council, which went bust in November, cited “increased costs” in temporary accommodation as one of the reasons for its £25.9m forecasted net overspend.

For many social landlords who have traditionally propped up councils’ housing supplies, it was the decision in 2016 to start cutting the right to deduct mortgage interest from gross income before tax which really shattered them.

‘We’re not all crazy capitalists’

Andrew Claringbull is a 58-year-old landlord in Surrey and Sussex. He has had tenants for decades, does not do annual rent reviews and owns outright the majority of his portfolio so is not beholden to interest rate rises.

He said: “The axing of mortgage interest rate relief has had a huge impact on us. On mortgaged properties we are paying tax on income that we have not and never will receive. Paying 100pc has exceeded our rental income in many cases.”

The same is the case for Derek Tyson, a 53-year-old landlord in Fife where the Scottish Government has capped rent rises in existing tenancies to 3pc.

He said: “My mortgage is £400. The rent is £600. But the tax I pay on that £600 pushes me into a loss. The tax benefit we used to have – of offsetting 100pc of the interest rate should be reintroduced. Then we’d be able to make the rent cap work.

“There are landlords who give us a bad name. But there are tons of us that do a good job and now we’re having to get out.

We’re not all crazy capitalists.”

New buy-to-let purchase lending was down 53pc this year and remortgaging fell by a similar 47pc. Forecasts by UK Finance show such lending is set to fall by a further 13pc in 2024.

After nearly doubling in size since the early 2000s, the private rented sector has sat at around 4.6 million properties (19pc of England’s homes) since 2013-14, according to the English Housing Survey.

In 2016, Scotland was home to 370,000 rental properties according to the Scottish Landlord Registration System. But today, this number has dwindled to around 340,000 – from 15pc to 14pc of the country’s housing.

A year ago, former first minister Nicola Sturgeon capped rents on existing tenancies at 3pc and placed a pause on evictions. Both won’t lift until March 2024.

Ms Sturgeon also hiked taxes on second home purchases from 4pc to 6pc. In England, the surcharge for second home buyers is just 3pc.

Duties on buying property in Scotland were already high for landlords, with taxes kicking in at £145,000, or £175,000 for first-time buyers – versus £250,000 and £425,000 in England.

To add insult to injury, Scotland’s plans to require all new rental properties to achieve an Energy Performance Certificate (EPC) grade C by 2025, and all remaining rental properties by 2028, are still going ahead.

Fife landlord Mr Tyson says he will have to evict at least two of his tenants – one of which is on benefits – because the properties have become loss-making investment. “I can’t wake up every day and keep losing money.”

The tenants, he says, were willing to pay the extra so they could stay in what they have come to know as their home. But the Government’s rent cap won’t let them.

Sussex landlord Mr Claringbull said his tenants have stayed in his properties for decades because the rents have always been sensible.

“We run a socially conscious business. We do good things by helping people have somewhere nice to live. No-one is excluded and everyone is given a chance and looked after. I think there are more of us than the public realises.

“In return, we just want to have enough money to pay the bills and live off. Most landlords never retire, they just pass away exhausted.”

‘Housing benefit clawback left me £6k short on rent’

In his Autumn Statement last month, Chancellor Jeremy Hunt announced that the Local Housing Allowance (LHA) would be re-pegged to the 30th percentile of local rents in April next year.

The announcement came after years of lobbying for the change, which marks the first in four years. Around 1.3 million private renter households rely on Universal Credit or Housing Benefit.

However, the benefit cap – which caps someone’s housing allowance – will not be uprated next year. This means a couple with two children receiving Universal Credit will hit the benefit cap in 83pc of local areas from next April, according to the think tank Resolution Foundation.

LHA rates will also be frozen from 2024 onwards again, which the Resolution Foundation said will simply create “arbitrary shortfalls between rents and housing support” again before the next reset.

The disparity between LHA rates and the rent landlords need to turn a small profit has pushed many out of the sector, according to Crisis.

But there’s another problem with the system. Mr Claringbull says he lets properties to housing benefit claimants, and the council pays the allowance straight to him.

This also means, however, that the council can claw it back if they want to. He had to pay back as much as £6,600 in one case, only getting it back years later after appealing.

Now, Mr Claringbull is considering rent protection insurance to shield himself from the impact of rental arrears piling up.

He added: “The claw back of housing benefit is a big issue for us. Councils do it when they think the tenant has wrongly claimed that benefit – for example, when they’ve gone into hospital without our knowledge.

“Why would anyone take on a housing benefit tenancy if they might not receive any rent?”

‘We’re paying Travelodge and Premier Inn to house people’

Shaun Davies, leader of Telford and Wrekin council in Shropshire and leader of the LGA, said “more people are living in temporary accommodation than ever before”.

Temporary accommodation is expensive for councils and should by its nature be short-term. But increasingly, it is becoming a long-term solution because there is simply nowhere else for people to go.

Mr Davies said: “We’re paying B&Bs, Travelodges and Premier Inns. We could have a situation tomorrow where a family is served notice to leave their home. But we haven’t got four-bedroom houses waiting for that eventuality.

“Look at Rightmove for yourself. What is available is very expensive, and these are not ‘desirable’. If you’re a single man, you’re such a low priority that you often end up street sleeping.”

The LGA leader said the “hokey pokey” around banning no-fault evictions, otherwise known as Section 21, has prompted landlords to sell up – and now, to add insult to injury, it has been delayed indefinitely.

For Mr Davies, the issues facing councils start with not enough social housing.

He added: “Good landlords are looking at uncertain regulation, the recent tax implications and just coming out of the market. There’s then a bulk of landlords who aren’t as good entering the market.”