Landlords Exit Rental Market Amid Tax & Regulation Pressures

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Recent data obtained by Landlord Today reveals a significant trend of landlords exiting the private rental market in a particular area of the UK. This information sheds light on the growing number of property owners who are choosing to leave the rental sector.

David Todd, the head of KW Property Sales & Management, based in Haddington, Edinburgh, has been at the forefront of investigating this issue. He recently submitted a Freedom of Information request to the Scottish Government. This request aimed to gather detailed statistics on landlords who own just one rental property. The results of this inquiry could provide valuable insights into why these landlords are withdrawing from the market and what implications this trend might have for the rental sector overall.

In May 2019, a Freedom of Information request revealed that Scotland had 228,212 landlords who each owned only a single property. This figure provided a snapshot of the rental market at that time, indicating a substantial number of landlords operating with just one property.

Recently, David Todd submitted a similar request for updated information and found a notable decrease in these numbers. As of June this year, the count of single-property landlords in Scotland had dropped to 179,516. This reduction marks a significant decline of almost 50,000 landlords. This trend highlights a notable shift in the rental market, potentially reflecting broader changes in landlord activity and attitudes within the sector.

David Todd comments, “The significant drop in the number of landlords owning only one property is a result of continuous pressures on the rental sector. These pressures include excessive taxation, frequent and costly changes in legislation, and a political climate that appears to be increasingly hostile towards landlords. As a result, the private rental market has seen a substantial reduction in available rental properties, with 50,000 fewer options now available. This decrease is putting additional pressure on the already strained social housing sector.”

Todd further explains that the reduction in available rental properties exacerbates the current housing crisis. The shortage of properties in the Private Rented Sector means that more individuals and families are struggling to find suitable accommodation. This shortage is not only affecting renters but is also placing greater demands on the social housing system, which is already facing significant challenges.

Additionally, Todd highlights that the most recent data he could find suggests that the social housing sector in Scotland has either remained static or potentially even declined over the past 20 years. This stagnation in the growth of social housing further complicates the situation, as it fails to address the increasing demand for affordable housing in the region.

Todd continues, “With the population increasing and ongoing political moves targeting landlords, we’re seeing a negative impact on the housing market. In East Lothian, where my office is based, the availability of rental properties is extremely limited. You could almost count the number of available rentals on one hand, and the few that are listed are often quickly rented out.”

Scotland has been at the forefront of various campaigns pushing for tighter regulations on the rental market. Activists have pushed for measures such as rent controls and stricter rules for all types of lettings, including short-term rentals like those listed on Airbnb. This has led to the implementation of a nearly zero-percent rent cap and a temporary ban on evictions. Although some of these restrictions have been loosened, they remain more stringent than in other parts of the UK, creating a challenging environment for both landlords and tenants.

Since April of this year, landlords have been given the ability to propose any amount of rent increase for tenants on private residential tenancy agreements. This change allows landlords more flexibility in adjusting rents, but it also introduces a system for tenants to challenge these increases if they believe them to be excessive. If a tenant disputes the proposed rent hike, they can refer the issue to a rent officer, who will then apply a tapering formula to determine the acceptable increase.

The tapering formula is designed to protect tenants from unreasonable rent increases. If the amount proposed by the landlord exceeds what is allowed under this formula, the rent officer will set the rent at the lower, formula-determined level. This process ensures that rent increases are moderated and prevents landlords from imposing excessively high charges.

It is important to note that the tapering formula only comes into play if the tenant challenges the rent increase. If the tenant does not object to the proposed increase, the new rent will automatically apply once the notice period ends. This means that tenants who do not actively contest the proposed increase might end up paying the full amount suggested by their landlord.

David Alexander, chief executive of the Scottish property agency DJ Alexander, has drawn attention to a concerning trend in the social housing sector. According to his recent calculations, the proportion of social housing in Scotland’s total housing stock has significantly declined. In 1993, social housing made up 37.5% of the total housing stock. By 2020, this proportion had decreased to just 23%, indicating a substantial reduction in social housing availability.

Alexander’s figures suggest that approximately 214,000 social homes have been lost over the past 27 years. This decline highlights a broader issue within the housing market and underscores the ongoing challenges faced by the social housing sector in Scotland.