Tax increases on the private rented sector are hitting tenants but failing to achieve their aims, the Residential Landlords Association (RLA) has warned.

With new research by the Local Government Association (LGA) showing that the average private sector rent is now £852 a month across the country, the RLA warns that it is a reflection of the supply crisis in rental housing.

RLA Policy Director, David Smith, said: “Today’s research from the LGA shows clearly the problem being caused by the government’s tax increases in a softening economy.

“Individual landlords are stalling investment in new property as a result of the changes, whilst institutional investors are failing to come forward to provide the homes to rent we need.

“The government argued that the tax changes were about supporting first time buyers.

"What has happened is that tenants can’t find the homes to rent they need, whilst being unable to afford a home of their own.

“The rental housing tax hikes are simply hurting but not working for anyone. It is time to scrap them.”

A sharp fall in buy to let mortgage applications further demonstrates the trend.

The RLA claims the situation is likely to deteriorate as landlords deal with the impact of mortgage interest relief is phased down to the basic rate of income tax.

According to research by the RLA, only 19 per cent of landlords plan to invest in new property over the next year, with 58 per cent considering reducing further investment in their rental properties due to recent tax increases.

Although the government has tried to increase the number of privately rented homes by encouraging institutional investment in the sector, the London School of Economics last year said that individual landlords will remain the dominant players in the market.

The RLA has repeated its assertion that 'no route can be found to boost the supply of homes for private rent that the country needs without providing support for the majority of landlords who are individuals or small firms.'

It is calling again for the government to scrap the decision to tax a landlord’s turnover, rather than profit, abandon the mortgage interest relief changes and to no longer apply the stamp duty levy on additional homes where a property is adding to the supply of housing available to rent.

We spoke to a group of landlords about the challenges their facing - take a look at the video here. You can also hear more from Sarah Davidson on the subject in her This is Money column.