Rachel Reeves’s Budget will pile pressure on renters – ‘people can’t take much more’ | Politics | News
Industry leaders claimed Rachel Reeves’ Budget would put pressure on tenants by increasing rents and forcing landlords out of the market, with a warning: “People can’t take any more.” This drastic decision comes after the Chancellor approved a 2% increase in income tax on rental profits from April 2027; increased the basic, higher and additional rates to 22%, 42% and 47%.
The increase, announced in a statement in the House of Commons yesterday, ends months of speculation and comes alongside the Tenants’ Rights Bill, which will ban no-fault evictions and extend notice periods. Matt Hutchinson, director of apartment sharing site SpareRoom, said the tax raid could be the final blow for many homeowners.
Mr Hutchinson said: “There is a real risk that landlords, faced with low profit margins, will pass this on to tenants by increasing rents, which are already at record levels.
“Tenants have no protection against market fluctuations and too many people are spending 40-50% of their income on rent. People can’t afford any more.”
He described it as the “final straw” and added: “Driving landlords out of the industry in the middle of a supply crisis that keeps rents unaffordable doesn’t help anyone, least of all tenants.”
Vann Vogstad, founder and chief executive of COHO, one of the UK’s largest markets for HMOs and professional lettings, said tenants would bear the real cost.
Mr Vogstad said: “Tenants as well as landlords will pay the price for the Chancellor’s action. This tax increase will inevitably result in higher rents, especially when combined with the upcoming Tenants’ Bill of Rights reforms. It’s just basic economics.”
He warned that landlords who cannot raise rents sufficiently will sell and leave the market in the hands of giant companies.
Mr Vogstad continued: “Where tenants cannot pay the rent, landlords will be forced to sell. This will not help tenants get on the property ladder, as demand for housing remains strong and prices are unlikely to fall meaningfully. Instead, we will see more properties bought by large corporate landlords who prioritize shareholder value over tenant welfare.”
Mr Vogstad said HMOs, which are often the cheapest per-room option for younger and lower-paid workers, would suffer the most because their higher returns of 12-18% (compared to 3-6% for standard letting) meant a much bigger absolute tax hit.
According to the Office for National Statistics, average private rents in England rose by 8.8% in the year to October; Many tenants currently spend half their take-home pay on housing.
Industry estimates suggest 100,000-150,000 private landlords have gone out of business since 2016; The new tax is expected to accelerate immigration.
Mr Vogstad said the Government should encourage new, shared and purpose-built rental homes rather than “making landlords an easy political target”.
With the changes delayed until the 2027/28 tax year, landlords have 18 months to raise rents or sell; This is a window that will cause supply to tighten further.
