Tax hikes on the private rented sector are hurting tenants but failing to achieve their objective, the RLA has warned.
The news comes following the publication of research by the Local Government Association showing that the average private sector rent is now £852 a month across the country.
Whilst this figure is a mean average rather than the more accurate median rent of £675 figure produced by the Valuation Office Agency – so heavily skewed by much higher rents in London – the RLA is warning that it is a reflection of the supply crisis in rental housing.
This is further demonstrated by sharp falls in buy to let mortgage applications.
According to the RLA the situation is likely to only get worse as landlords feel the squeeze as mortgage interest relief is phased down to the basic rate of income tax.
RLA research has found that just 19% of landlords plan to invest in new property over the next year, with 58% considering reducing further investment in their rental properties due to recent finance changes because of tax increases.
Although Ministers have sought to boost the number of homes for private rent by encouraging institutional investment in the sector, the London School of Economics last year said that individual landlords will remain the dominant players in the market.
The RLA is warning that no route can be found to boost the supply of homes for private rent that the country needs without providing support for the majority of landlords who are individuals or small firms.
It has renewed calls for the government to scrap the decision to tax a landlord’s turnover, rather than profit, abandon the mortgage interest relief changes and to no longer apply the stamp duty levy on additional homes where a property is adding to the supply of housing available to rent.
RLA Policy Director, David Smith, said: “Today’s research from the LGA shows clearly the problem being caused by the government’s tax increases in a softening economy.
“Individual landlords are stalling investment in new property as a result of the changes, whilst institutional investors are failing to come forward to provide the homes to rent we need.
“The government argued that the tax changes were about supporting first time buyers. What has happened is that tenants can’t find the homes to rent they need, whilst being unable to afford a home of their own.
“The rental housing tax hikes are simply hurting but not working for anyone. It is time to scrap them.”
To read the RLA’s Landlord Investment, Finance, and Tax Report 2016 examining the impact of the changes on landlords, tenants and the PRS as a whole click here.