"These measures are not likely to bring about the investment needed in new PRS stock to reduce rents in the PRS, and the lack of new measures to help landlords or tenants with their costs or tax liability could be remembered at the ballot box"
- Neil Cobbold - PayProp UK
Tenant and long-term landlord incentives missing from the budget
While there was no specific mention of tenants in the budget, the removal of the Debt Relief Order (DRO) application fee may encourage more tenants in arrears to apply for DROs as it allows them to write off current rent arrears.
However, tenants taking this route are likely to be evicted, and the DRO will remain on the tenant’s credit record, which will make it more difficult for them to find a rental property or take out a mortgage shortly. Letting agencies would be advised to carefully monitor tenant credit checks to help ensure the right tenants are placed in affordable properties.
Landlords considering selling their property have been given a tax boost by the Chancellor, with capital gains tax on residential property being reduced from 28% to 24%. This may encourage more landlords to realise any gains in property prices and sell up instead of continuing to keep a property in the private rented sector.
Anyone looking to acquire multiple rental properties will also be disappointed by the abolition of the multiple dwellings stamp duty relief. Non-domicile property owners who hold property within a foreign company may also be impacted by the new tax regime announced today. Details of the new regime will be published later in 2024.
These measures are not likely to bring about the investment needed in new PRS stock to reduce rents in the PRS, and the lack of new measures to help landlords or tenants with their costs or tax liability could be remembered at the ballot box.
Will new short-term let measures boost the PRS?
Across the PRS, the biggest change will be to short-term lets. The furnished holiday lets tax regime has been abolished, which currently makes it more profitable for second homeowners to let out their properties to holidaymakers rather than to long-term tenants to rent.
The government is also separately proposing a register of short-term lets and requiring planning permission for any properties new to the sector. Similar schemes have been proposed or are in place in Scotland, Wales and Northern Ireland.
The big question for those in the PRS is if these tax and regulatory changes will persuade short-term lets landlords to change their properties to long-term lets.
Data from VisitBritain indicates that the introduction of the Scottish short-term let licensing scheme in October 2023 initially led to a 4% reduction in nationwide short-term let supply by November. By January 2024, however, there was a partial recovery, with only a 2% decrease compared to October 2023. This suggests that some landlords may have returned to the sector after complying with licensing requirements, or new landlords may have invested in short-term lets.
Additionally, some former short-term let properties may have been sold or transferred to the long-term market, with the Scottish government reporting an additional 641 properties listed in October 2023 on the national landlord registry.
With incoming changes in tax and regulation in England, it seems likely that we’ll see a combination of short-term lets moving into the long-term market and some landlords selling up, especially with the reduction in capital gains tax.
