The Evolving Landscape of the Rental Market: Will Amateur Landlords Become a Thing of the Past?

October 17, 2024
The recent discussions surrounding potential increases in capital gains tax (CGT) and other duties from the upcoming Budget have raised alarms about the future of amateur landlords in the UK. These discussions prompt a critical question: are we really concerned with the decline of the amateur landlord, and more crucially, will it impact renters?

Transitions in property ownership could redefine rental experiences.

There has been consistent chatter about the impending extinction of amateur landlords, particularly if significant changes to CGT loom on the horizon. But how serious is this threat, and what would it mean for those who depend on rented accommodation?

In the broader scope of property investment, it’s often assumed that those who are professionals in their field offer superior quality compared to amateurs. If your bathroom needed repairing, you would seldom hire a DIY enthusiast when a licensed plumber is at hand. This analogy, while tongue-in-cheek, does provoke thought regarding the current state of amateur landlords, who by definition are engaging in property rental not as their primary means of income but as a side endeavor or an extension of wealth management—often holding just one or two rental properties.

The Shift of Ownership in Rental Properties

Recent figures from the Deposit Protection Service (DPS) highlight a trend revealing that nearly 25% of landlords with one or two properties are contemplating selling, while only 12% of larger-scale landlords are considering a sell-off. This could indicate a significant shift in the landscape of rental properties, paving the way for institutional landlords and professional management companies to fill the potential void left by these amateur landlords.

Adding to this narrative, a report from Capital Economics suggests that should CGT increase, the number of properties held by amateur landlords could plunge by nearly one million in the next decade.

Yet, rental campaigners remain skeptical regarding the projected exodus of landlords from the market, dubbing this trend a recurring alarm bells strategy employed by landlord lobbying groups over the last decade. Tom Darling from the Renters’ Reform Coalition argues that despite the consistent threats of market collapse, tangible changes have never manifested.

“And it’s never happened,” remarked Darling, encapsulating the resilient crux of the argument shared by many who advocate for rental reforms today.

The Implications for Renters

For landlords facing a potential squeeze due to tax increases, the situation is undoubtedly nerve-wracking. If the profitability of rental investments dwindles and properties become harder to manage financially, selling off assets becomes an attractive alternative.

However, should these amateur landlords exit the market, what ripple effects would this have for renters? It’s a complex web. Some may argue that amateur landlords tend to provide a personal touch, offering homier environments and attentive service compared to impersonal large-scale operators. But this is not a universally held view; my own experiences with both types have shown a mixed bag of professionalism and responsiveness.

Professional landlords typically have the resources and systems in place to quickly address tenant issues—boiler repair or roof leaks, for instance—often with the benefit of existing contracts with reliable service providers. Conversely, amateur landlords can be a gamble, where personal investment and attentiveness come sometimes at the cost of experience.

The dynamics of property management are shifting as new policies loom.

One negative aspect renters may face, particularly in the short-term, is the upheaval of changing ownership of properties. For someone who has already navigated the stormy seas of renting, this is not uncharted territory but rather another challenge added to their portfolio of grievances. The reality is that the independent struggles facing renters in today’s market will not disappear simply through the transition of property owners.

The Bigger Picture: Housing Accessibility

Despite all the discussions about landlords leaving the market, the crucial underlying issue remains unaddressed: insufficient housing supply. It is critical to recognize the fundamental structures that directly affect rental accessibility—if we truly wish to catalyze meaningful change, increasing the overall housing supply is vital.

The root of rental market dysfunction can rarely be simplified to who owns the properties; extensive policy revisions and economic plans must be revisited with a serious look at how to increase availability within the property sector as a whole. While groups representing landlords may protest concerning the purported fallout of escalating taxes, it’s worth considering the broader implications of their collective exit.

In a scenario where amateur landlords curtail their portfolios en masse, viable housing would either migrate to institutional investors or potentially end up in the hands of end-users—those looking to establish family homes rather than mere investment assets. The former move may not radically alter the rental market dynamics and the latter could even mean a diminishing number of renters due to potential rises in home ownership.

Conclusion: A Shift, Not a Collapse

So, what would happen if amateur landlords indeed pulled out? Perhaps their routes leading to the sale will lead to better-conceived investments, but what is certain is that a purged rental market will neither guarantee a utopia for renters nor create a realm devoid of challenges. The investment landscape is shifting, but as we navigate these tumultuous waters, what becomes vital is the subsequent focus on where housing supply stands to ensure that renters’ needs remain at the forefront amidst these changes.

Ultimately, the notion that the landscape will turn dramatically for renters if amateur landlords fade away is perhaps overblown. As the history of the rental sector illustrates, transformations have always occurred, whether they appear large or small. Housing equity and availability continue to be pressing issues that merit comprehensive examination beyond the identities of landlords themselves.

In addition to these market dynamics, Hanley Economic Building Society recently introduced a fee-free two-year fixed-rate mortgage within their shared ownership options, underscoring the drives toward accessible home ownership for first-time buyers and those with smaller deposit capacities. The rate stands at 5.35%, structured to promote practicality in the current fiscal landscape.

As we inch toward the end of 2024, the property market’s evolution beckons potential challenges and opportunities alike. Balancing these changes while ensuring fair access and support for renters should remain a priority for policymakers and industry stakeholders alike.