Landlords across the UK are facing mounting financial pressures as borrowing costs rise and new regulatory and tax burdens loom. The National Residential Landlords Association (NRLA) has called on the government to take urgent action to ease these growing costs, warning that without intervention, tenants will bear the brunt of increasing rents.

Rising borrowing costs and their impact

According to an analysis by Moneyfactscompare.co.uk highlighted by the NRLA, landlords are currently paying on average £1,100 more annually in borrowing costs compared to January. This increase is partly attributed to market shifts linked to the ongoing conflict in the Middle East, which has influenced mortgage rates and availability for buy-to-let investors.

These higher borrowing costs add to the financial strain landlords already face, making it more challenging to maintain rental properties without passing on expenses to tenants.

Additional financial pressures on landlords

Beyond mortgage costs, landlords are contending with a series of further financial demands. A planned increase in income tax on rental income from next year is expected to directly contribute to higher rents, according to the Office for Budget Responsibility. The NRLA also highlights uncertainty surrounding the costs of complying with the proposed Private Rented Sector Ombudsman and database under the Renters’ Rights Act.

Moreover, new energy efficiency requirements could require landlords to invest up to £10,000 per property, a significant outlay that many landlords will struggle to absorb without increasing rents.

Calls for government intervention

Ben Beadle, chief executive of the NRLA, emphasised the need for government action, stating: “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.” He warned of a “perfect storm” for tenants caused by growing taxes, uncertain costs linked to new legislation, and the ongoing freeze on housing benefit.

Beadle added, “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.” He urged ministers to recognise the real-world consequences of their decisions and to support both renters and the rental market.

Challenges for tenants and the rental market

Tenants on lower incomes face particular difficulties as rents rise while housing benefit rates remain frozen. Although calls for rent controls have emerged, the NRLA warns that such measures could restrict the supply of rental homes. Data from Zoopla indicates that there are nearly five tenants competing for every available rental property, underscoring the pressure on the market.

What this means for landlords

Most landlords are unlikely to absorb these increased costs without raising rents, given that average declared rental income for unincorporated landlords stands at £19,400 per year, according to HM Revenue and Customs data. This figure is below the earnings from a full-time minimum wage job, limiting landlords’ capacity to offset rising expenses.

The NRLA is calling for a range of government measures to alleviate cost pressures. These include scrapping the planned tax rise on rental income, minimising new regulatory costs, reforming the tax system to support energy efficiency improvements, and unfreezing housing benefit rates to help tenants keep up with rent increases.

Source: Based on reporting from Property118

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