National Residential Landlords Association – Written evidence (UKH002)
1.0 About Us
1.1 The National Residential Landlords Association is the UK's largest membership organisation for private residential landlords, supporting and representing over 90,000 members in England and Wales.
1.2 NRLA members range from full-time landlords running property portfolios to those letting single bedroom flats. We help our members navigate the regulatory and legal framework for the private rented sector and proudly offer some of the most comprehensive learning resources and market-leading intelligence available in the sector.
1.3 We seek a fair legal and regulatory environment for both landlord and tenant and actively seek to work with the Government on behalf of our members. In addition, our representatives run regular branch meetings and landlord courses in over 100 locations throughout England and Wales and provide an important link for our members with local authorities and fellow landlords.
2.0 Executive Summary
2.1 In 2019/20 the private rented sector in England accounted for 18.7% of all households, down from a recent high of 20.3% in 2016/17, which aligns closely with the implementation of recent tax change on the sector including restricting mortgage interest relief to the basic rate of income and introducing a new stamp duty levy on the purchase of properties to rent out.
2.2 The demand for rental accommodation remains strong, particularly as the country recovers from the pandemic. The consequence is that prospective tenants are struggling to find the properties they need to rent, where they want to rent them at a price they can afford.
2.3 Whilst recent years have seen the introduction of a suite of tax measures designed to slow the market, this has proved counterproductive in meeting the Government’s ambitions to support homeownership. Professor David Miles, a former member of the Bank of England’s Monetary Policy Committee has rightly observed that: “aspiring first-time buyers are hardly helped by squeezing the supply of rental property and driving rents up.”
2.4 There is therefore a desperate need to develop policies to boost the supply of homes for private rent alongside all other tenures. We propose the following mix of tax measures and other policies designed to provide greater certainty to the market:
3.0 Composition of the Private Rented Sector and Demographics Shaping It
3.1 According to the English Housing Survey, in 2019/20 18.7% of all households in England, 4,438,000 are in the private rented sector, making it the second largest housing tenure, behind owner occupation. This has fallen from a recent high which in 2016/17 saw the sector make up 20.3% (4,692,000) households.
3.2 As outlined in table 1, what is most notable is that the private rented sector is no longer simply a tenure for young people. Over the past decade some of the most significant growth within the sector has been amongst older tenants, especially those aged 55-64 and 45-54. The Government has noted that the average age of a private sector tenant is now 41.
Table 1: Age of Household Reference Person in Private Rented Households in England
2009/10 and 2019/20
Age of Household Reference Person
3.3 In addition to the changing age profile of private tenants, the last decade has seen the number of private rented households in England with at least one dependent child living in them having increased from 1,051,00 (31.3%) in 2009/10 to 1,598,000 (36%) in 2019/20.
3.4 We also know that:
4.0 Profile of Private Landlords
4.1 Any work focussed on the supply of homes for private rent needs to take into account the demographics of private landlords. According to the Government’s most recent data:
4.2 An analysis by the NRLA suggests that the average net annual rental income per private landlord is less than £4,500.
4.3 Government data also suggests that’s almost 70% of private sector landlords are basic rate income taxpayers.
5.0 The Demand for Private Rented Housing is Increasing
5.1 Whilst the Government’s primary objective for housing has been to encourage and support those wanting to become homeowners, at present the data is clear that the demand for private rented housing is outstripping supply.
5.2 A wide ranging survey of members of the NRLA in England and Wales, conducted in partnership with the research consultancy BVA/BDRC, found that 39% said that demand for homes to rent had increased in the second quarter of 2021 – an 8% increase on the first quarter of the year and a five year high. BVA-BDRC observes that demand has increased largely due to the relaxation of COVID restrictions and a more buoyant economic outlook.
5.3 The figures mask a trend which is seeing a two-tier rental market developing across particular regions in England and Wales. In Yorkshire and the Humber, Wales, the South West and the South East over 60% of landlords said that demand for homes to rent had increased. In stark contrast, just 15% of landlords in Central London said demand had increased in the second quarter of the year, compared with 53% who said it had fallen. This supports the trend which has seen growing numbers of tenants looking to leave London in the wake of the growth in home working.
5.4 Despite an overall increase in demand, our research shows that the proportion of landlords intending to buy property has fallen from the four year high of 19% recorded in the first quarter of the year, to 14%. In comparison, the proportion looking to divest has returned to 20%, up three percentage points from the first quarter of the year.
5.5 This picture of demand outstripping supply in the private rented sector is borne out by, amongst others:
5.6 In addition to the pressing need to address the shortfall between the demand for and the supply of private rented housing, we concur with the Government’s observation that the private rented sector has an important role to play in supporting labour market mobility, “allowing households to move easily both within and between regions, leading to a more efficient allocation of labour and skills.”
6.0 Government Policy is Restricting Supply
6.1 Despite the clear need to boost the supply of private rented housing, recent policy decisions have had the effect of supressing the supply of such housing.
6.2 In 2015 the then Chancellor, George Osborne, took the decision to restrict Mortgage Interest Relief to the basic rate of income tax. He told the House of Commons at the time that: “Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers cannot.” In the same year a 3% stamp duty levy was announced for the purchase of homes to rent out, because, Osborne said: “people buying a home to let should not be squeezing out families who can’t afford a home to buy.”
6.3 Such decisions were based on highly questionable reasoning. Of note:
6.3 The decisions taken on Mortgage Interest Relief were particularly difficult to fathom
6.4 Given this, we agree with the assessment of Professor David Miles, a former member of the Bank of England’s Monetary Policy Committee, who has previously warned that such tax changes actually make it harder for tenants to become homeowners. As he has noted: “aspiring first-time buyers are hardly helped by squeezing the supply of rental property and driving rents up.”
6.5 Some argue that a smaller private rental market is a good thing making more homes available for purchase. The reality is that previously rented homes gradually being released on to the market are not going to drive prices down sufficiently to make owner occupied housing more affordable. A mass sell-off of rental properties risks exposing the country to a housing crash, as warned by the previous Governor of the Bank of England.
6.6 But it is not just tax measures which are holding the market back:
6.7 Whilst the Government has often sought to highlight the role that the corporate build-to-rent sector can play in meeting the demand for private rented property it is important that this is not seen as a panacea to the supply problems in the sector given that:
7.0 Boosting Supply
7.1 Given the need to boost the supply of homes for private rent we propose the following:
 MHCLG, English Housing Survey 2019 to 2020: headline report, 17th December 2020, Annex Table 1.1, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945376/2019-20_EHS_Headline_Report_Section_1_Households_Annex_Tables_.xlsx.
 MHCLG, English Housing Survey Private rented sector, 2019-20, 8th July 2021, page 7, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000052/EHS_19-20_PRS_report.pdf.
 MHCLG, English Housing Survey 2019 to 2020: headline report, 17th December 2020, Annex Table 1.4, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945376/2019-20_EHS_Headline_Report_Section_1_Households_Annex_Tables_.xlsx.
 MHCLG, English Housing Survey Private rented sector, 2019-20, 8th July 2021, page 26, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000052/EHS_19-20_PRS_report.pdf.
 MHCLG, English Housing Survey Private rented sector, 2019-20, 8th July 2021, Annex Table 1.22, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000053/EHS_19-20_PRS_Ch_1_tables.ods.
 MHCLG, English Housing Survey Private rented sector, 2019-20, 8th July 2021, Annex Table 1.24, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1000053/EHS_19-20_PRS_Ch_1_tables.ods.
 MHCLG, English Private Landlord Survey 2018 - Main report, January 2019, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf.
 NRLA, Energy efficiency support failing to help most in need, 26th July 2021, available at: https://www.nrla.org.uk/news/energy-efficiency-support-failing-to-help-most-in-need.
 House of Lords Written Answer, Private Rented Housing: Income Tax, 27th July 2021, available at: https://questions-statements.parliament.uk/written-questions/detail/2021-07-14/HL2005.
 The research consultancy BVA-BDRC questioned 753 members of the National Residential Landlords Association using online interviews between the 20th June and 5th July 2021.
 RICS, UK Residential Market Survey, July 2021, available at: https://www.rics.org/globalassets/rics-website/media/knowledge/research/market-surveys/7._web_-july_2021_rics_uk_residential_market_survey_tp.pdf.
 Propertymark, Demand from tenants highest ever on record during July, 24th August 2021, available at: https://www.propertymark.co.uk/resource/prs-report-july-2021.html.
 Rightmove, Rental Price Tracker – Q2 2021, available at: https://www.rightmove.co.uk/news/rental-price-tracker/.
 House of Lords Written Answer, Private Rented Housing, 28th July 2021, available at: https://questions-statements.parliament.uk/written-questions/detail/2021-07-14/HL2004.
 HM Treasury, Chancellor George Osborne's Summer Budget 2015 speech, 8th July 2015, available at: https://www.gov.uk/government/speeches/chancellor-george-osbornes-summer-budget-2015-speech.
 HM Treasury, Chancellor George Osborne's Spending Review and Autumn Statement 2015 speech, 25th November 2015, available at: https://www.gov.uk/government/speeches/chancellor-george-osbornes-spending-review-and-autumn-statement-2015-speech.
 London School of Economics, Taking Stock - Understanding the effects of recent policy measures on the private rented sector and Buy-to-Let, May 2016, page 5, available at: http://lselondonhousing.org/wp-content/uploads/2016/05/GRP12392-LSE-report-design-WEB.pdf.
 Mirrlees Review, The Taxation of Land and Property, 2011, page 379, available at: https://www.ifs.org.uk/uploads/mirrleesreview/design/ch16.pdf.
 Professor David Miles, The war on the rental sector has no winners, 11th September 2019, available at: https://news.rla.org.uk/blog-the-war-on-the-rental-sector-has-no-winners/.
 The Times, Carney warns of housing crisis if landlords leave the market, 6th July 2016, available at: https://www.thetimes.co.uk/article/carney-warns-of-housing-crisis-if-landlords-quit-the-market-s9mrr2hx2.
 BEIS, Improving the Energy Performance of Privately Rented Homes in England and Wales, September 2020, available at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/946175/prs-consultation-2020.pdf.
 IFS, Spending Review 2020: IFS Analaysis – Welfare and the national living wage, 26th November 2020, available at: https://www.ifs.org.uk/uploads/Welfare-and-the-National-Living-Wage.pdf.
 NRLA, Landlords Made Scapegoats for COVID Rent Debt Crisis, 17th June 2021, available at: https://www.nrla.org.uk/news/landlords-made-scapegoats-for-covid-rent-debt-crisis.
 MHCLG, Support for renters continues with longer notice periods, 12th May 2021, available at: https://www.gov.uk/government/news/support-for-renters-continues-with-longer-notice-periods.
 British Property Federation, Build to Rent Map, available at: https://bpf.org.uk/about-real-estate/build-to-rent/.