There seems to be no let-up in the government’s apparent campaign against buy to let landlords in the private rented sector. The latest twist in what has become a long chapter of interventions seemingly designed to make life even more difficult landlords came in the shape of the Chancellor of the Exchequer, Philip Hammond’s, mini-budget or Autumn statement to parliament on the 23rd of November 2016.
The changes were widely reported by the media, including the Daily Telegraph, and there are two items, amongst others, of pretty well immediate impact – and concern – for landlords:
- the abolition of letting fees payable by private sector tenants; and
- an increase in the insurance tax – payable on any insurance policy – to 12% with effect from June 2017.
Although the first of these moves is clearly designed to appeal to tenants, landlord organisations, including the National Landlord’s Association (NLA) have already pointed out that letting agencies still need to charge for their services and those which are not covered by charges to tenants need to be picked up by landlords, with an almost inevitable increase in rents.
The increase in insurance tax also needs to be met by buy to let investors when they arrange the landlord insurance which is essential to their business. This is almost certain to result in increased insurance premiums, even on those competitively priced landlord policies arranged by specialists such as ourselves here at GSI Insurance.
The long chapter of punitive measures
The measures announced in the Chancellor’s Autumn statement are just the latest in what appear to have been designed specifically to make life difficult for buy to let landlords.
The onslaught might be traced back to October 2015:
- this is the date when the Deregulation Act 2015 came into effect, introducing a raft of new regulations for landlords to follow in the biggest shake-up of Assured Shorthold Tenancies (ASTs) since the Housing Act of 1996;
- probably the biggest changes came through the changes granting tenants further protection against so-called “retaliatory eviction” (following their demand for repairs or maintenance of the rented property) – but which has the effect of evicting even less than responsible tenants that much more difficult;
- other detailed regulations mean that landlords are now obliged to provide tenants with copies of the accommodation’s Energy Performance Certificate (EPC), the current Gas Safety Certificate, the guide “How to Rent” and to safeguard tenants’ deposits in accordance with the Tenancy Deposit Protection scheme;
- even greater bombshells were dropped in the successive budgets by the Chancellor or the Exchequer in July 2015 and again in the spring of 2016;
- these introduced a punishing new tax regime in which private sector landlords lost their entitlement to tax relief on mortgage interest charges and a 3% surcharge in Stamp Duty for the purchase of second homes and an increase in the amount of Capital Gains Tax for which landlords are to be liable;
- with effect from February 2016, landlords were also landed with responsibility for verifying that any tenant and his household has an immigration status granting them the “Right to Rent” on pain of the landlord being fined up to £3,000 for letting to someone who does not have this Right to Rent;
- to cap it all, the Bank of England has recently announced much tougher criteria for the granting of buy to let mortgages – with the result that landlords with more than 4 buy to let properties may be charged a higher rate of interest.
The Autumn statement adds up to an increasingly difficult climate in which private sector landlords are struggling to operate and to generate sufficient rental income for a viable buy to let business.