Autumn Budget Misses Mark on Housing Reform: UK Rental Market Squeezed by Shortages and Rising Rents
The UK rental market faces mounting pressures, with a recent Rics survey revealing a critical shortage of properties and surging rent prices. Landlord instructions, a key indicator of properties available to rent, fell to a net balance of -29%, marking this the lowest level since 2021. Strong tenant demand is driving rents higher, with 33% of surveyors expecting further increases. While some banks have eased mortgage rates, renters continue to feel the strain, as new tenancy rents now consume 30% of household income. David Hannah, Group Chairman of Cornerstone Tax, highlights the implications of recent tax reforms, pointing to the government’s Autumn Budget as a missed opportunity to support the housing market. The Budget’s 2% rise in the second home surcharge, coupled with recent stamp duty hikes for landlords, has further constrained rental stock, exacerbating tenant affordability challenges
Annual rent growth peaked at 9.2% in March, the highest rate since records began in 2015, before slightly easing to 8.4% in September, according to official figures. Data from PriceHubble, published by the Office for National Statistics in October also highlights that rent on new tenancies costs renters 30% of their gross income, the highest share recorded since 2017. Meanwhile, house prices continue to climb, supported by expanding buyer demand for four consecutive months, signalling strong interest in homeownership despite difficulties in the rental sector.
David argues the Chancellor’s latest step will discourage second home ownership, aiming to create more opportunities for prospective homeowners. Another stamp duty change from the Labour government – the end of the temporary nil rate increase in April – is expected to drive a surge in transactions in early 2025, as buyers rush to complete purchases before the new tax rate takes effect, followed by a predicted slowdown in activity.
David Hannah, Group Chairman of Cornerstone Tax, comments:
“The decision from the government to lower stamp duty bands shows a concerning deficit of joined-up thinking. Does this Chancellor and Prime Minister not understand that if they want 1.5 million new homes, they cannot drive landlords out of the market, incur additional charges for first-time buyers and freeze up working capital for developers – which can only be available if these homes are selling. I expect stamp duty receipts to fall significantly, then to flatline in Q1 2025, potentially plunging the British property market into a desperate situation. In essence, reducing stamp duty thresholds means that it will ultimately be the consumers who foot the bill.
“Furthermore, it would make sense for the new Government to suspend, or even abolish, the 3% surcharge where properties are being acquired for private rental sector investment. Removing this measure would encourage landlords to increase their holdings, rather than exit the market – reversing the decline in supply of rental homes and potentially expand it to the point where demand no longer outstrips supply.”
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Applicant budgets remain stable and rental prices in line with historic norms
