June was a busy month for ARLA following a stream of property announcements from the coalition government in the run up to and post-Budget. While the austerity measures were more sympathetic towards the housing industry than anticipated, the value of the Private Rented Sector (PRS) in restoring a healthy market has been woefully underestimated with little prospect of real investment to come.

Throughout the recession, the PRS helped to support a stagnated housing market where many homeowners were forced to rent a property either as a stop gap between purchases, or following a job relocation change or job loss. Now, according to government statistics, the PRS represents more than 13 per cent of UK housing stock – some three million people – making it a sector that can not be ignored.

The planned rise of 10 percentage points to 28 per cent in Capital Gains Tax (CGT) for higher-rate tax payers may not be as severe a blow as anticipated, but is still inhibitive to the industry’s growth. It represents a substantial increase in the costs involved with the purchase and sale of second properties let to tenants, and will almost certainly lead to a drop in investment. Some landlords will simply not be able to afford to survive in the buy-to-let market, while other potential landlords will be put off from entering into it.

PRS investment has also been hindered by the Government’s recent decision not to press ahead with compulsory regulation of letting agents. Regulation would have been both reputation enhancing and standard-boosting, with greater controls to reassure existing and potential tenants and landlords alike, ultimately boosting investment.

It is therefore a great shame that the progress ARLA made under the previous administration has since been ignored. Anyone can become a letting agent, or landlord – regardless of experience or qualifications, leaving consumers exposed to financial risk.

We believe a dual approach is required if the current problems of the housing sector are to be addressed. If difficulty in obtaining mortgages continues, the role of the PRS will become more and more integral to the recovery plan. It therefore makes sense for the Government to support the rental industry in the same way it has promised the aspiring homeowner.

Introducing more stringent regulation into the buy-to-let sector would represent a big step in the right direction, enabling significant investment into the industry. Equally, categorising landlords as businesses would exempt them from CGT, further encouraging investment and professionalising the industry. Without these kinds of measures, the sector is likely to suffer – as will its consumers.


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