In Focus (2024 Qtr 3): Renters' Rights Bill, BTL lending & tax

Introduction

Every quarter, the NRLA conducts a consultation with its members to gather insights on key issues affecting landlords and PRS. The Quarter 3 consultation coincided with the announcement of the new Renters’ Rights Bill, providing an opportunity to capture immediate reactions and likely responses from landlords and the sector.

The fieldwork was conducted from the September 15th – August 2nd, gathering responses from 1,466 landlords all with properties in England and Wales. In addition to views on rental reform, the survey explored:

• Capital Gains Tax
• Reasons landlords adopt different ownership models 
• Landlords with Buy-To-Let mortgages
   

Landlord confidence

The announcement of the Renters’ Rights Bill triggered a sharp decline in landlord confidence, which fell to a record low, 2024 Quarter 3 was the steepest drop recorded in a single quarter.
This downturn in confidence coincided with:

• Record highs in the proportion of landlords planning to sell (53% within the next 12 months).
• Record lows in landlords intending to purchase new properties (7%).
   

The Renters' Rights Bill

The consultation examined landlords' initial reactions to the Renters’ Rights Bill, which was published just days before the survey began. Landlords were most concerned with changes in the Bill which impact their ability to regain possession. Other concerns involved: 

• Scepticism about the court system's capacity to handle possession cases
• Frustration over the lack of court reform
• An apprehension about inadequate transition periods

Note: fixed term tenancies being abolished was top of the "most concerned" list for student landlords. 

Despite concerns, there were elements in the Bill landlords felt they could live with:

• Measures to ban bidding wars
• Establishment of a PRS property database
• The creation of a PRS Ombudsman service
   

Tax

Landlords were asked how potential reforms to CGT might influence their portfolio decisions. 

• 40% of landlords would consider selling or reducing their holdings if CGT were linked to income tax bands.
• Concerns about CGT remain significant, as rates and thresholds continue to influence portfolio strategies.
   

Ownership models

The survey found that 25% of landlords now have part of their portfolio held in a limited company, a record high.

• Drivers for incorporation include access to mortgage interest relief and financial planning benefits.
• Barriers such as costs, complexity, and Stamp Duty mean many landlords have not pursued incorporation. 
   

Buy-to-let

The report explored the financial challenges faced by landlords with Buy-To-Let (BTL) mortgages, particularly in the context of rising interest rates. Key insights include:

• 61% of landlords have mortgages on at least one property, and 85% of these mortgages are fixed rate.

Many landlords anticipate significant challenges when their fixed-rate mortgages expire, with over a third expecting higher rates.
Landlords who have mortgages which include Interest Cover Ratio (ICR) conditions continue to cite this as a major factor influencing rent increases.

• 85% of landlords with ICR-based terms increased rents in the last 12 months.