Landlords Want Eviction Reform. Can It Supercharge BTL Profits?

Recent research conducted by mortgage market specialist Pegasus Insight suggests that landlords are demanding a more efficient eviction process. A faster and simplified eviction process can be a critical factor in encouraging investment in the Buy-to-Let (BTL) sector. The UK government is introducing significant changes to rental laws to reshape the landscape for landlords and tenants.

Why is Streamlining Evictions More Important than Lower Taxes?

According to recent research, 64% of landlords prioritise improving the eviction process over tax reductions. Lowering taxes was a major motivator for increasing investments in the property market. However, landlords are more concerned about the eviction process than lowering taxes currently. The looming removal of Section 21 ‘no-fault’ evictions under the upcoming Renters’ Rights Bill has heightened landlords' concerns.

The director of Pegasus Insight says, "The fact that a larger proportion of landlords point to a more efficient evictions process as a greater spur to investment than a lower tax regime demonstrates how worried they are about the removal of Section 21 ‘no-fault’ evictions in the Renters’ Rights Bill."

The no-fault eviction rule was present in Section 21 of the Housing Act 1998. According to this rule, landlords could provide eviction notices to tenants without a valid reason or breach of the contract. However, the new Renters’ Rights Bill introduced in the King’s Speech does not contain this rule. This could discourage investment in the BTL sector, reducing the availability of rental properties and potentially increasing the rents.

What Other Factors Influence Landlords' Investment Decisions?

While efficient evictions top the list, landlords also referred to several other factors that could boost investments in the Buy-to-Let (BTL) sector.

Over 60% of landlords surveyed that the following as key motivators:

• Reduction in CGT - Lowering Capital Gains Tax (CGT) would directly increase the profitability of property investments.
• Re-introduction of Mortgage Interest Tax Relief - This would reduce some of the financial pressures on landlords by allowing them to deduct mortgage interest from their taxable income.
• Removal of the 3% Stamp Duty Surcharge - Eliminating this additional cost would lower the entry barrier for new property investments.

Additionally, 59% of landlords expressed interest in investing in BTL mortgage rates below 4%, while 52% demanded for greater regulatory stability. These preferences are among landlords planning to sell within the next year, with 71% of them emphasising the need for eviction reform.

Conclusion

The findings from the research offer a clear message to policymakers. Addressing the eviction process is crucial for boosting investment in the BTL sector. As the government prepares to introduce the Renters’ Rights Bill, it must carefully balance the needs of landlords and tenants to prevent a decline in rental property availability and a consequent rise in rents.