Landlord mortgage crisis on track to trigger the sale of 735,000 rental homes
As many as 735,000 properties will be lost from the rental market as a result of rising mortgage rates forcing landlords to sell up, economists are predicting.
Capital Economics, which carried out the research, also said that reintroducing tax breaks for property investors would prevent the sell-off of 110,000 rented properties and help tenants by easing a growing housing crisis.
Landlords are being pushed to sell their properties because the Government cut tax relief on mortgage interest repayments, which has pushed up their costs, the research consultancy said in a new report.
Before 2017, landlords who owned properties in their own names could offset mortgage payments before calculating their tax bill. Now they only get a credit equating to relief at 20pc, which has severely dented profits.
The National Residential Landlords Association called on the Government to review the decision, warning of a "supply crisis" that is hurting renters.
Increased mortgage rates will lead to the loss of up to 735,000 rented properties by 2027, compared with 2021 figures, the research found.
The landlord exodus would reduce the total number of rental properties by 13pc and cost the Treasury £1bn in lost tax revenue, it was predicted.
Capital Economics also said reversing the tax change could reduce rent rises in the sector and financial burdens on landlords planning maintenance and improvements.
The analysis is based on predictions that the Bank Rate will peak at 5pc and remain above 2.5pc until the end of 2027.
In recent days the forecast for interest rates has become even more punishing for landlords, with rates expected to hit 5.5pc by the end of 2023.
The reinstatement of mortgage interest relief would prevent the sell-off of 110,000 properties, which would cost the Treasury £400m in lost income and corporation tax, the think-tank said.
Ben Beadle, chief executive of the National Residential Landlords Association, a lobby group, said: “In the midst of an unprecedented cost-of-living crisis, the Government needs to put economic reality before political pride and reverse this travesty of a reform.
“Tax hikes on landlords, exacerbated by rising interest rates, have deepened the supply crisis.”
He said the situation was “unlikely to improve until and unless [the tax policy] is reversed”, adding: “A radical rejection of these damaging policies is necessary to help stem the tide of lost rental properties, limit rent rises, and boost Treasury revenue.”
Are you a landlord who feels forced into selling up? We want to hear from you, email: alexa.phillips@telegraph.co.uk
