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Landlords set to slash spending on property as tax burden increases

Paloma Kubiak
Written By:
Paloma Kubiak

Landlords spend £3,600 a year on each property but the amount they pump into the economy is set to be slashed as they cut spending to offset tax hikes.

The average landlord now spends £3,632 per year in running costs per individual property, before tax or mortgage interest, according to specialist mortgage lender Kent Reliance, part of OneSavings Bank.

The sum accounts for a third of rental income and has rocketed by a quarter since the start of 2007, an estimated rise of £714.

Of this cost, £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.

All of this spending by landlords means they currently contribute £15.9bn to the economy, supporting thousands of jobs across the property industry. This has more than doubled from an estimated £7.1bn in 2007, owing to the rapid growth of the private rented sector and climbing costs per property.  However, many are set to slash spending as their tax burden rises.

Tightening belts

Over a third of landlords are looking to cut their annual spending to offset tax hikes, a move that will hit the tradesmen and professionals that support the property industry.

Property upkeep and maintenance was the most popular area identified by landlords (17%) for potential cost cutting, followed by letting agent fees and mortgage costs (both 10%). Those landlords anticipate they will reduce spending on letting agent fees by 28%, property maintenance and servicing by 21% and mortgage costs by 15%.

This will impact the industries and jobs that depend on landlords for revenues. Across the private rented sector, total planned cuts would reduce spending by more than £500m each year.

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.”