Home Property Private rental sector will pick up the tab for Reeve’s Budget spending

Private rental sector will pick up the tab for Reeve’s Budget spending

by Nick Lyons, CEO at NoLettingGo
1st Nov 24 12:34 pm

So, now we know who is going to pick up the tab for Chancellor Rachel Reeves’ tax and spend Budget.

The bulk of the £40bn tax hike is to come from businesses in the form of increased employer National Insurance contributions – up 1.2 points to 15% from April 2025.

The Chancellor reckons this will raise £25bn to improve public services and it falls squarely on the shoulders of business.

Nevertheless, as she later admitted, the additional cost to employers will result either in decreased profits, lower pay settlements for staff or both.

For letting agencies and the enormous number of small suppliers that all agents depend on, this will have a massive effect.

Investigate the possibility

And it will be made worse by the additional burden of a 6.7% increase in the National Living Wage for full and part-time employees aged 21 and over.

This will have a huge impact on many small businesses. These additional costs will either have to absorbed or passed on to the landlords, who, in turn, will have no choice but to pass them on to tenants who will face yet further rises in rents.

I suspect that some of the smaller players in the sector might consider whether running their business is actually worth it and many might investigate the possibility of finding solutions through technology rather than paying extra for staff.

Even though allowances have been raised and some mitigations have been put in place in an effort to protect smaller companies, it seems ridiculous to me to hammer small businesses as a plan to achieve growth.

And the financial assault on the sector didn’t end there.

Although landlords escaped the heavily-tipped increase in Capital Gains tax, houses for Buy to Let were earmarked for an increase in additional stamp duty – up from 3% to 5%. In order to avoid a rush to avoid the extra charge, the Chancellor made the rise effective from Thursday of this week with the result that some transactions impacted by the change were already in progress.

This could lead to re-negotiations or, at worst, fall-throughs.

Coming on top of the increased regulation and abolition of Section 21 (no-fault) evictions in the Renters’ Rights Bill as well as the imposition of new energy efficiency standards in rental homes by 2030, this was a further blow to investors, many of whom may think twice about any plans they had to expand their portfolios.

Weight of opposition

While it is true that increases in CGT on non-property assets may make some investors consider the PRS as an alternative, it is also true that a significant number of landlords are already disposing of properties or, in some cases, thinking of selling up altogether.

In truth there were few crumbs of comfort in Labour’s first Budget since 2010 but the freeze on fuel duty will have been welcomed by many – not least because it, too, was expected to go up.

But in a fiscal event where money was made available for Build To Rent, new homes, social housing and even the Warmer Homes Plan, there was nothing for private landlords and nothing to grow the sector as a whole.

The truth is that the country relies on a thriving PRS – at 4.6million homes, it accounts for 19% of the residential properties in England and around £1.5 trillion worth of stock.

If investors continue to leave the sector because of the weight of opposition they feel, where are those millions going to live?

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