Further rule changes ahead
Looking forward, by 2025, any new let coming into the private rented sector must have a minimum EPC rating of a C and given the majority of households are in the D rating, this may further impact on supply as the threshold of expenditure expected to be spent by landlords is beyond reasonable and has the potential to restrict landlords from remaining in the sector.
Longer term, and by a proposed government date of 2028, the entire private rented sector will have to meet a minimum rating of a C.
Propertymark is also calling on the UK government to consider tax breaks to support landlords reaching these carbon neutral goals.
Without providing landlords with incentives and access to sustained funding, it is unlikely that energy efficiency targets for the private rented sector and a reduction in emissions across the property sector will be met.
It is encouraging, however, to see lower interest BTL mortgage products coming to the market for those properties with an EPC rating of A-C, available to properties that are newer builds with improved energy ratings or where some improvements have been achieved.
From April 2023, landlords selling a property will be required to pay thousands of pounds more in capital gains tax as a result of the tax changes announced in the UK government's recent Autumn Statement.
These changes will see the government reducing the CGT tax-free allowance from £12,300 to £6,000, implementing a further reduction to just £3,000 by 2024.
The Treasury has made £14.3bn in CGT in the 2020-21 tax year, taking contributions from a total of 323,000 taxpayers with the current rate set at 28 per cent for BTL properties.
Reintroducing mortgage interest relief would cost the government £1bn. However, not only would this increase supply and drive down rents, it would be a medium-term commitment to reducing the £30bn spent annually on housing benefits, which is between £8bn and 10bn more than the Office for Budget Responsibility had forecast.
Importantly, more supply would make it easier for tenants to move homes in the private rental sector and ease some of the pressure on councils who have an obligation to rehouse a tenant from the private rented sector but often cannot do so due to demand exceeding social housing supply.
Case for change
The tax money taken by the government by putting in place section 24 was traditionally used by landlords to maintain and improve standards.
If landlords could make these tax-deductible savings, they would be in a stronger position to improve standards and keep rents as low as possible.
