Dear Jeremy Hunt,
The UK rental market is broken. Last year rents hit record highs in every major town and city in the UK. Demand for rentals has soared yet, since 2017, supply has almost halved. So it’s hardly surprising that when SpareRoom recently polled renters to ask if they had confidence in the Government's current approach to housing, 94% said no.
However, there are fixes available right now that would turn around the catastrophic landslide in supply and help stabilise the market while longer-term solutions are put in place.
Here are two things you could address in the upcoming budget that would make an immediate difference:
1. Create a level tax playing field for residential and holiday lets
2. Restore the real value of Rent a Room relief
Why create a level tax playing field for residential and holiday lets?
Landlords of short-term lets currently benefit from a wider range of tax incentives than those offering residential lets. This has led to a huge increase in short-term lets while, at the same time, residential supply has fallen.
A 2023 VisitBritain report found that the number of short-term rental properties in the UK has grown by 20% over the past four years. These are all properties that aren’t available to tenants as homes.
We ask HM Treasury to review the range of tax reliefs offered to the long-term rented and short-term rented sectors, to level the tax playing field between them and stop encouraging buy-to-let landlords to switch from providing long-term homes to holiday lets. A staggering 94% of landlords we polled said they think that levelling these tax breaks would encourage more landlords to rent out their properties on a long-term basis.
To be clear, we have a housing crisis, not a hotel room crisis.
Why Restore the real value of Rent a Room relief?
There are 26 million empty bedrooms in owner-occupied properties in England and Wales alone. The Rent a Room Scheme was introduced to encourage people to rent these out to help with housing supply.
But the last change was announced almost a decade ago in 2015, and the rental market has changed drastically since then. We suggest that HM Treasury set the threshold of the Rent a Room Scheme at £9,795 in the next Budget.
This will help boost the supply of rented accommodation by encouraging more homeowners to rent out their spare rooms, while securing essential financial help for struggling homeowners over the coming years, as many come off fixed rate mortgages and face substantial increases to their payments.
It’s also essential that the Rent a Room Scheme is restricted to people offering longer term residential accommodation, not short term and holiday lets. The scheme was introduced to boost residential supply, which is needed now more than ever.
Our key priority has to be increasing the supply of residential accommodation. Building houses takes time and involves complex decisions about location, conservation, planning, finance and infrastructure. There has to be a plan to build more homes, but both the measures outlined above would help us use the houses we already have far more effectively.
SpareRoom