Landlords have praised former Tory leader Iain Duncan Smith for slamming anti-BTL legislation brought in under chancellor George Osborne for 'failing dramatically'. But could his own Universal Credit system be as much to blame for the pressures landlords are currently facing?

In a Sunday Telegraph article, on Sunday, June 18, he said it was "time to look again at the way we treat private landlords who buy houses to rent."

He continued: "George Osborne’s decisions to impose a stamp duty levy on the purchase of homes to rent, to restrict mortgage interest relief to the basic rate of income tax and to tax a landlord’s turnover rather than profits have led to landlords scaling back or even leaving the sector altogether.

"They are a significant provider of the additional housing we need. We should be encouraging them with devices such as VAT relief on conversions or even capital allowances, not punishing them. It’s no wonder buy-to-let purchases have fallen dramatically. If the purpose was to stop foreign owners buying up property and leaving it empty. We are in danger of throwing the baby out with the bath water.”

Landlords respond

The recognition of private landlords as essential to the social housing market is certainly welcome, and while the picture for landlords isn’t all the doom and gloom Duncan Smith paints, it was clear the support was appreciated.

One landlord, on the landlords website, thanked Duncan Smith for his intervention on "the Treasury’s fiscal attack on landlords and specifically the policy which disallows the finance costs of our businesses as a legitimate expense."

She wrote: "If you are able to somehow corral other members to support us in our endeavour to get these outrageous assaults on our businesses reversed, that would be truly appreciated. We are already extremely grateful for your support so far."

To date, Conservative MPs David Jones and Howard Flight have voiced their opposition to Section 24 of the Finance (no.2) Act 2015, "but not many others have spoken out," the poster wrote. "If there could be some coordination to create a parliamentary voice about this, that would be great."

Another poster wrote: "Congratulations on being the first MP to criticise publicly George Osborne’s anti-BTL tax attacks, and thank you. Finally an MP has publicly pointed out a predictable consequence of disallowing mortgage interest for individuals – that they have stopped increasing the supply of dwellings – almost two years after the policy was announced. Hitherto, Lord Flight has been a lone voice.”

He went on to say that there are other consequences as well: "Rents are being increased to cover the extra tax, and tenants on benefits who cannot afford the increases are being evicted, adding to the number of homeless people and the cost of putting them in “temporary” accommodation wherever it can be found."

The social housing gap

The social housing gap is a problem Sarah Davidson has written about recently over at This is Money, after attending a Simple Landlords workshop and talking to a group of female landlords. According to Simple research, they’ve historically been more likely to rent to people on benefits than their male counterparts - 35% compared to just 25% of men.

She says: “The lack of joined-up thinking looks likely to have disastrous consequences for the poorest people in society. New purchases are now subject to a 3 per cent stamp duty surcharge, tax relief on mortgage interest is falling annually until 2020, buy-to-let mortgages are significantly harder to come by and landlords now need to pay income tax on their revenue as opposed to their profit.

“The changes mean that some landlords may be forced to sell up, and others can claim they have been forced to pass on higher costs to their tenants.”

However, Sarah goes on to attack Duncan Smith’s own brainchild - Universal Credit - as part of the plethora of government reforms putting the squeeze on both landlords and tenants.

She continues: “Now add to this the ongoing saga that is universal credit... When the universal credit system was announced several years ago, there was a spate of warnings that landlords would withdraw from housing social tenants.

“But that was before the massive tax changes to buy-to-let. Combine the two, and the threat that social tenants will lose their homes is looking a lot realer, begging the question: where are they going to live?”

Feeling the pinch

Sue Sims, a Birmingham-based landlord, thinks she’ll have to stop renting to tenants on benefits - because the numbers simply don’t add up anymore. She explains: “It’s already been proved that the arrears rates in the areas which have universal credit have gone up hugely. You need the security that you’re going to get your rent paid on time, otherwise you can’t pay your mortgage. As a result, I won’t even consider housing benefit tenants in my properties any longer.

“If a lot of landlords across the board are going to exit the private rented sector, it's going to hit social housing really hard. These are the people that need all the support they can get, and they're just not going to get it from the private rented sector. I don't know where they are going to go.”

Alex Huntley, Head of Operations at Simple Landlords Insurance adds: “There’s absolutely no doubt that landlords are feeling the pinch - and even feeling victimised by recent government legislation.

“For the most part though, our customers seem to be sitting tight and waiting to see what will happen in the coming weeks and months, as Brexit plans move forward and the election fall-out continues to settle. In a recent survey 88% of our landlords said they still planned to be a landlord in two years’ time. However, how many will have to change their strategy - and possibly stop renting to tenants on benefits - still remains to be seen.”

Take a look at what else Sarah Davidson and landlords have to say about the challenges ahead in this video.