Landlord tax breaks should be reinstated to stem flow of selling up, NRLA says

• Re-instating mortgage interest relief could ease the rental supply crisis
• This tax relief was replaced by a less generous system 
• It has been one of the contributing factors to landlords selling up

Scrapping a tax hike on privately rented housing could help to ease the rental supply crisis, according to the National Residential Landlords Association.

Reinstating mortgage interest relief in full for the private rented sector could help alleviate the sector’s supply crisis, research carried out by Capital Economics for the NRLA has shown.

Mortgage interest relief allowed landlords to deduct their mortgage interest from the income they received from rent when filing their return.

But this was tapered out between 2017 and 2021 and was replaced by a much less generous tax credits system.

Under the tax credits system, landlords instead receive a 20 per cent tax relief on mortgage interest payments.

The research comes amid a supply crisis which continues to cause pain for renters across the UK who are desperately seeking a place to live.

Changes to mortgage interest relief have been a factor in lots of landlords’ decision to sell their properties because of higher mortgage rates.

With mortgage interest relief reinstated, the research claims that 110,000 fewer properties would be lost from the private rental market.

If the Bank of England’s base interest rate was to peak at 5 per cent and remain above 2.5 per cent until the end of 2027, as many have predicted, up to 735,000 private rented properties could be lost across the UK compared to 2021, the study suggests. 

This is because interest rate hikes have caused mortgage rates to rise, including for landlords. 

Ben Beadle, chief executive of the NRLA, said: ‘In 2015 the Government said it wanted to ‘create a more level playing field between those buying a home to let and those buying a home to live in’.

‘In doing so it hiked costs for responsible landlords and totally ignored the burden it would create for renters.

‘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. And as this research demonstrates the situation is unlikely to improve until and unless it is reversed.

‘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.’