George Osborne set out the details of his Summer Budget which included several announcements affecting Britain's landlords.
Firstly, mortgage interest tax relief for purchasers of buy-to-let homes is to be restricted to the basic rate of income tax, which is currently 20%.
And secondly, from next April, landlords will no longer be able to automatically claim for a 10% tax reduction to cover 'wear and tear' of furnishings and objects during a tenancy. Under the new system, landlords will only be allowed to make claims against money they have spent by presenting receipts for costs incurred.
You can find our comprehensive report on the Budget and what it means for landlords here.
As landlords will soon be unable to deduct as some business costs from the income they generate, this has caused many industry commentators to speculate that landlords will raise their rents to cover the additional costs.
And, true to fashion, there have been a number of reports released to the press which suggest that significant numbers of landlords are considering increasing their rents.
The first report came courtesy of the Residential Landlords Association (RLA). The organisation went directly against HMRC, saying that the measures introduced by the Chancellor will have a significant impact on rent levels.
The RLA surveyed over 1,000 landlords and found that 748 (around 65% of the sample) indicated they were considering raising rents in response to the Budget.
Not long after, online letting agent Rentify reported that 56% of landlords it surveyed admitted they are likely to increase rents as a direct result of the Budget.
The study also found that 57% of the participants said it is unlikely that they will expand their property portfolio beyond its current size, with 23% saying they were considering selling off some of their current stock.
What could happen over the coming months?
There are landlords who feel they will have no choice but to raise rents to cover the shortfall incurred by mortgage interest tax relief being cut to just 20%. However, it would be wise to remember that these are just two surveys covering the intentions of only 1,500 of over 1 million landlords in the UK. Many landlords, due to their financial position, for example not having to finance a buy-to-let mortgage, may not feel they need to raise rents.
What's more, both reports reference landlords who are 'considering' or are 'likely to' raise rents which is of course no concrete evidence that anything in particular will occur, as we know rental values for new tenancies are already increasing at a steady pace.
Another thing to consider is that as these changes were announced in an Emergency Budget they are still only proposals and will be debated by MPs in October and have to be voted on in both the House of Commons and the House of Lords.
One positive of the proposed new rules for both existing landlords and tenants is the increased professionalism they will encourage. By having to think even more carefully about investments and really treating letting property as a business, rogue operators could be further discouraged from entering the industry.
It is becoming increasingly clear that the Government see the Private Rented Sector (PRS) is an important foundation of Britain's housing future. As the PRS grows in size and more of us look towards long-term renting options, this will encourage further professionalism among landlords and higher quality of private rental properties – which is only a good thing for both sides of the rental transaction.