Landlords: Are you planning to increase your rent this year?
It’s one of the most difficult decisions faced by landlords. If and when to increase rent, and by how much. The issues are many; on the one hand no landlord wants to overcharge their tenants, but neither should they undercharge and risk losing money on their investments. This is a business after all.
They also need to weigh the risk of possibly losing tenants after a putting up their rent, yet must ensure their charges are in line with local market rates and conditions.
Achieving the balance between charging a fair but profitable rent and keeping the property fully let can also be difficult, especially in these times of economic uncertainty and changes in government legislation.
All these issues can lead to landlords thinking it is easier to just maintain their current rates rather than risking rocking the boat with an increase. However, a poll on simplybusiness.co.uk, suggests 60% of landlords are planning to increase the rent they charge this year. Mostly in response to government legislation.
A year of change for landlords
It has certainly been a turbulent few months in the rental industry with landlords seemingly being hit from all sides. It has all created an environment in which every landlord needs to examine their business, and it is hardly surprising so many are looking to raise the rent they charge their tenants.
A perfect storm. Stamp duty, allowances, and tax
Arguably the biggest impact on a landlords business is the buy-to-let changes which were introduced earlier this year. Not the least of which was the 3% surcharge on stamp duty for buy to let properties.
With landlords still reeling from a charge that will heavily increase the tax they pay on new properties, legislation was then introduced on the wear and tear costs they can reclaim.
Only actual costs incurred have now replaced the deductible allowance which landlords were previously entitled to claim back from their profits.
The punches kept coming
Further shocks were in store with changes to tax relief which will be phased in over the next few years. Under the new rules all landlords, regardless of tax bracket, will only be able to claim back 20% of their mortgage interest costs.
Even the one potential bit of good news turned out to be a slap in the face. The cut in the basic rate of capital gains tax does not apply to landlords, effectively resulting in an additional charge should they decide to sell a property.
Passing on the costs
In the face of all this financial upheaval, it is easy to see why so many landlords will be raising their tenants rent. Perhaps we should be more surprised that, according to the same poll, a quarter of landlords will not be raising rent whilst 16% are still undecided.