There is a growing demand for the government to act swiftly to boost the supply of private rental homes in the UK. Landlords in the UK endure stamp duty on purchasing properties to rent and mortgage rate restrictions. Most landlords prefer selling their homes in the wake of rising mortgage costs. The decision to sell properties is more viable than struggling with the management of buy-to-let properties.
The situation is deteriorating from bad to worse as the government does not appear to have concrete plans for the private rental sector. A lower supply of rental homes is causing the rents to shoot up through the sky. A conservative MP for Northampton South is vocal about the immediate need to address the imbalance between the rising number of tenants and the declining supply of rental units.
Removal of the stamp duty surcharge on additional homes will cause boosting the supply of private rental houses by 900,000 new units over the next decade. The rise in new private rental homes will add 10 billion to the government's kitty as additional tax receipts. The government can do its bit by ensuring greater security on rental regulations in the future besides unfreezing Local Housing Allowance.
Private landlords on a selling spree
The rising costs of maintaining rental properties are crippling individual private landlords who contribute 94 percent to the overall private rental sector. It is resulting in a dwindling supply of private rental homes. The official figures confirm that the last five years witnessed a sharp drop in rental properties, amounting to over a quarter of a million.
Over sixty percent of landlords plan to sell their properties to exit the private rental sector. Most landlords are selling households because of rising interest rates, reducing tax reliefs, and high energy costs. Landlords are losing profits with a tax-relief reduction on buy-to-let mortgages. They have only two options. Sell a part or full property or hike the rent.
Rising rents worsen the cost-of-living crisis
There are several instances of landlords raising the rents only to remove the tenants and advertise the property with double rent. Higher rents in cities cause middle-income or poor tenants to lose a significant portion of their income as rents.
The situation is not different in rural areas as people are battling with higher energy bills and the rising cost of food. The average monthly rent in 2021/22 was 795 in the UK. It was the highest rent in history. The rents grew by an average of 12 percent in 2022 across the UK.
Shortage of affordable housing
Successive governments have failed to build adequate homes over the last few decades. The country needs 340,000 new homes each year. The annual requirement for affordable homes is 145,000. Despite targeting 300,000 new homes, the government supplied only 216,000 new homes in 2020-21. The cost of renting and the cost-of-living crisis will lead to homelessness. There is a possibility that 125,000 low-income families are on the brink of homelessness.
The shortage of rental homes is driving the demand for private rental homes in the UK. The growth in the number of tenants looking to rent homes is 20 percent, while the supply of rental homes dropped by 10 percent. The future does not hold any promise for renters as the government appears to be dragging its feet to improve the supply of affordable homes. Landlords are feeling the pinch of rising mortgage payments with higher interest rates. The government must understand that the solution to the rental supply crisis is to improve the health of private rental sectors by withdrawing tax hikes.
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