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Tax-hit landlords will cut spending and harm the economy

Wednesday 17 May 2017

More than a third of landlords hit by rising taxes say they will cut expenditure in a move that will harm the tradesmen and professionals that support the property industry. 

New research by Kent Reliance, the mortgage lender, reveals that landlords currently contribute £15.9 billion per year to the British economy through pre-tax spending on maintaining their properties. 

This contribution has more than doubled from an estimated £7.1 billion in 2007, thanks to the fast expansion of the private rented sector and the soaring costs of property upkeep.

Across the private rented sector, the total planned cuts would reduce spending by more than £500 million each year, the survey found.

John Eastgate, sales and marketing director of OneSavings Bank, said: "Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy. 

"Not only do they house a huge proportion of the country’s workforce, bridging the housing demand and supply gap, their spending supports thousands of jobs – whether builders, cleaners, lawyers and accountants or letting agents.

"Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences. 

"Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the government’s tax raid, or both. 

"One side effect of the recent changes, and rising running costs, will be the professionalisation of the sector as amateur and accidental landlords leave the market. 

"There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes."

Landlords spend £5.5 billion on maintenance and servicing, £2.0 billion in service charges and ground rent, £963 million on insurance, £904 million on utilities, and a further £1.1 billion on other associated costs.

Spending on letting agents’ fees totals £4.7 billion each year, with £644 million spent on legal and accountancy fees, and £218 million on administration costs. 

The average landlord now spends £3,632 per year in running costs, before tax or mortgage interest – which accounts for a third of rental income. 

This has risen by 25 per cent since the start of 2007, an estimated rise of £714. 

Of this, £1,025 is spent on maintenance, repairs and servicing, with £870 spent on letting agent fees per property. 

A typical landlord spends £374 per property each year in ground rents and service charges. Insurance typically costs £181, and legal and accountancy fees £121, while administrative and license fees add another £41 per year. 

A further £652 is lost in void periods each year.

A third (36 per cent) of landlords, surveyed for Kent Reliance, are already reducing or planning to cut back their spending, while 20 per cent plan to raise rents.

Property upkeep and maintenance was the most popular area identified by landlords (17 per cent) for potential cost cutting, followed by letting agent fees and mortgage costs (both ten per cent).

Those landlords anticipate they will reduce spending on letting agent fees by 28 per cent, property maintenance and servicing by 21 per cent and mortgage costs by 15 per cent.

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