State of the PRS- 2017, Quarter 4

The energy efficiency standards of the private rented sector have come under greater scrutiny over the past three years, with new regulations coming into force in April 2018. This means that no property can be let for a new tenancy if it is below an E EPC rating. This report builds upon our previous quarterly reports on the private rented sector and provides the opportunity for a deeper understanding of the issues facing private landlords, tenants and the wider sector.  

Key findings

1. Of those landlords with an F or G rated property, over 1-in-3 landlords reported that they could not afford to bring it up to at least an E rating. On average landlords reported that it would cost £5,789.76 to do so. On the basis of these findings, how tax relief is currently imposed on residential properties for improvements needs to be rethought. Tax relief for improvements should be applied against rental income, rather than at the sale of the property.
2. The rapidly changing sector, economic uncertainty, and increasing regulation is taking its toll. The proportion of landlords that are planning to sell properties in the next 12 months has increased by four percentage points since Q3 2016 and now stands at 23%. We estimate that this could be 133,000 net loss of properties to rent over the next 12 months.
3. A final concern is that a large proportion of the F and G rated properties were reported to be built before 1919. Whilst this is not an argument that because a home is old that it does not provide a safe, secure and affordable home, however, the question is, do the homes of the past offer what is needed for the homes of the future?

Key recommendations

Based on the findings of this research, we have develop a few key policy recommendations. These are as follows:

1. Change current taxation policy on relief for improvements. Current policy sees relief generally provided at the sale of the property for individual private landlords; this should be switched to relief against rental income to encourage and support more landlords to make improvements to their properties
2. Introduce positive taxation policies to support the private rented sector and encourage investment/grant funding to be targeted at improving private rented households
3. Review the current stock of homes and plans to increase housing across the country, in order to develop a new tenure neutral house building strategy that ensures we have enough homes to meet the challenges of the future