Is a rent freeze the answer to the cost of living crisis? Sadiq Khan seems to think so based on his interview on Good Morning Britain today. The presenters pointed out that rents have increased over 20% in Manchester, over 17% in Birmingham and over 16% in the Capital. Sadiq Khan’s answer to this is a 2 year rent freeze. He justifies this by stating that 40% of landlords own their property without a mortgage. The presenters countered with a better strategy to perhaps restrict landlords’ rights to evict tenants and Sadiq Khan stated that the Labour party was lobbying the government to end no fault evictions; in fact, he implied that all no fault evictions were undertaken in order to increase rents, which is a complete falsehood, latterly it is more often as a result of the landlord exiting the market.
He stated that a rent freeze has been imposed in Scotland and that there have been no issues, whereas the presenters highlighted that many landlords north of the border have approached their governing body in Scotland to state that they intend to remove their property from the rental market as it no longer has a positive cashflow, which defeats the objective of the investment in the first place. He went back to his 40% of properties are unencumbered argument but fell down when the presenters asked about the other 60% and the potential of many properties being withdrawn from the rental market adding to the current housing crisis. He felt the answer was for mortgage companies to provide payment holidays like they did in the pandemic, but we must remember that these were not granted interest free. He suggested discretionary grants would be another solution, but I cannot see a government paying landlords thousands of pounds when they consistently legislated against landlords in recent years.
Sadly, the presenters did not tackle the section 24 tax issue which is one of the main reasons rents have increased so significantly in the first place. The additional tax burden, matched with onerous legislation past and future have caused many landlords to sell and seek alternative investment strategies.
It is difficult to understand how any government is going to tackle the housing crisis by constantly penalising landlord’s and looking at the rhetoric coming out of Westminster it does not appear that the tide is likely to turn any time soon.
If you are a landlord and looking for alternative strategies or even to sell in a tax efficient manner, then contact us to discuss the issues.
