Government needs to act on rising costs faced by rental market

Ministers need to act to tackle growing costs in the rental market as buy-to-let mortgage hikes risk further increasing rents.

Amidst ongoing conflict in the Middle East, the financial advice website, Moneyfacts, has warned of higher rental payments for tenants as landlords face “soaring borrowing costs”.

According to its analysis, landlords taking out a mortgage now face paying an average of £1,100 more a year now than they would have at the start of March.

The news comes as the sector faces rising costs on a number of fronts including:

• A planned increase in income tax paid on rental income from next year which the independent Office for Budget Responsibility has warned will lead to higher rents.
• Uncertainty over the costs landlords will need to pay to join the planned Private Rented Sector Ombudsman and database as outlined in the Renters’ Rights Act.
• An expectation that landlords will be required to pay up to £10,000 per property to meet new energy efficiency requirements from the Government.

The National Residential Landlords Association (NRLA) is warning that most landlords simply cannot absorb growing costs without passing them on through higher rents.

According to HM Revenue and Customs, the average rental income declared by unincorporated landlords is £19,400 a year – significantly less than what someone earns from a full-time minimum wage salary.

Low-income renters now face the double whammy of rising rents, coupled with an ongoing freeze on housing benefit rates.

Whilst calls have been made for forms of rent control, the NRLA is warning these would simply choke off the supply of homes to rent at a time when tenant demand remains so high. According to Zoopla, there are an average of almost 5 tenants competing for every available home to rent.

The NRLA is calling on the Government to develop a plan to reduce cost pressures faced in the market. This should include:

• Scrapping next year’s income tax hike on the sector.
• Keeping the costs of joining the private rented sector Ombudsman and database as low as possible.
• Reforming the tax system to ensure it better supports proactive energy efficiency improvements to homes to rent
• Supporting low-income tenants by unfreezing housing benefit rates.

Ben Beadle, Chief Executive of the National Residential Landlords Association, said:
 

“Whilst the Government cannot be held responsible for the impact of the conflict in the Middle East, it should take action where its own policies will lead to higher rents.

“Growing taxes, uncertain costs associated with the Renters’ Rights Act and the ongoing housing benefit freeze will create the perfect storm for tenants.

“With so many people reliant on the sector for a place to call home, ministers need to recognise the real-world consequences of their decisions.

“It is simply stereotyped nonsense that every landlord can somehow absorb ever-increasing costs indefinitely. They can’t, and as a result, it is tenants who will suffer most as rents continue to creep up.

“The Government needs to take action to support renters and ensure a healthy, vibrant market.”

-ENDS-

Notes:

• Rachel Springall, Finance Expert at Monyfactscompare.co.uk, has said: “Soaring borrowing costs will cause pain to landlords this year, as they join millions of consumers facing higher mortgage repayments. This is terrible news, as rising costs could lead to higher rental payments for tenants, or a drop in the pool of properties available for rent if landlords decide enough is enough and sell off their portfolio. The unrest in the Middle East has caused absolute mayhem in the residential mortgage market, buy-to-let rates are also being hiked, and hundreds of deals have been pulled from sale.
  
  “The positive sentiment entering 2026 has been shattered, and landlords not only have to face higher borrowing costs, but also prepare themselves for the Renters’ Rights Bill, which comes into effect at the start of May 2026. Those who were to take out a mortgage now compared to the start of this month will face higher repayments of £1,100 more a year. This is based on a borrowing of £250,000, over 25 years at 5.29%, versus 4.66% at the start of March 2026.”
   
• In the Budget last year the Chancellor announced a two percentage points increase in the income tax paid on rental income from next year. Assessing the impact of such a move, the Office for Budget Responsibility’s Economic and Fiscal Outlook report noted: “From April 2027, a 2 percentage point increase to the basic, higher and additional rates of property income tax, increasing them to 22, 42 and 47 per cent respectively. This is estimated to yield £0.5 billion a year on average from 2028-29. The costing incorporates a small negative impact as a result of the pass-through of the tax increasing rents and property tax receipts, which is more than offset by a reduction in house prices reducing other receipts.”
   
• It goes on later to warn: “The measures announced in this Budget reduce returns to private landlords, following various measures over the past 10 years that have also reduced returns. This successive eroding of private landlord returns will likely reduce the supply of rental property over the longer run. This risks a steady long-term rise in rents if demand outstrips supply.”
   
• HMRC data shows that the average rental income declared by unincorporated landlords is £19,400 a year, significantly below what someone would earn in a full-time minimum wage job.
   
• The Zoopla analysis on tenant demand in the rental market can be accessed here.
   
• Further information about the NRLA can be found at www.nrla.org.uk. It posts on X @NRLAssociation.
   
• The NRLA’s press office can be contacted by emailing [email protected] or by calling 0300 131 6363.