Max Armstrong, of North East Property Investment, a buy-to-let specialist, said the measures followed years of policy changes that made buy-to-let less profitable, and came along with minimal energy performance certification targets that could cost landlords as much as Up to £10,000 per property. “There is a concern that there will be a cumulative effect that, when you roll out the upcoming EPC requirements and lower the tax credit on mortgage interest, it will push small landlords out of the market,” he said.
For Jess Dean*, 51, and her partner, the burden is already painful. The couple is self-employed and has built a portfolio of seven properties in the Southwest as their retirement fund.
“We didn’t have any money until we were in our 40s, by that time it was too late to start my pension,” she said. “Our only option was ownership.”
But the government’s buy-to-let drive and rising house prices have already hampered their plans. “Our target was to get a pre-tax monthly rental profit of £5,000. We were at £3,500, but that came down to £3,200 after interest rates went up. For two people, that is no longer sustainable.”
Denny said a combination of previous measures, such as new requirements for electrical checks, had already cut profit margins. “Renewing a lease used to cost £75. We just renewed one and it cost £900. Bureaucracy costs a lot of money.” She is concerned that requiring all properties to meet the new minimum standards will lead to additional costs in the form of paying checks and issuing certificates.
“Real estate owners have been making their money and going with higher costs and a stricter system convincing them that there are easier and more profitable ways to make money,” said Sarah Coles, of investment firm Hargreaves Lansdowne.
Those selling would be affected by inflation if they kept their savings in the bank, so former landlords could turn to the stock market instead. Issa shares and shares will be allowed to invest £20,000 a year tax free. Self-invested personal pensions generally have an annual contribution limit of £40,000 but allowances can be carried over for three years. Ms Coles said funds offer a greater diversification of risk than investing in individual stocks.
A government spokesperson said: “Good landlords are not afraid of our rental reforms, which will give tenants greater security to challenge unreasonable rent increases and bad practices. We are strengthening the foundations that landlords can use to take back their homes where there is a legitimate cause.”
“We have consulted with the landlords and will continue to work with them while the legislation is being prepared.”