Almost two-thirds of landlords say they would seek to recover higher costs through rents as concern grows over tax changes and the implementation of the Renters’ Rights Act.

Research from Pegasus Insight found that 64% of landlords would look to recoup losses through higher rents, while 83% said tax and regulatory changes would make them more selective about prospective tenants.

The findings come ahead of the Budget on 28 October and amid concern among landlords about the cumulative effect of changes affecting the private rented sector.

Pegasus Insight’s latest Landlord Trends research found that 88% of landlords are concerned about the 2% increase in income tax rates applying to rental income from properties held personally. That figure has risen by three percentage points since the previous quarter.

COURT CAPACITY A CONCERN

The implementation of the Renters’ Rights Act is another source of concern, with 91% of landlords saying they are “very concerned” about the prospect of court backlogs when attempting to regain possession of a property.

Previous research from Pegasus has indicated that landlords can respond to changes in taxation and regulation by selling properties, incorporating their businesses or postponing further investment.

Its separate Tenant Trends research suggests renters are also expecting landlords’ additional costs to affect rents. More than a quarter of tenants expect rents to increase as landlords pass on the costs of complying with the Renters’ Rights Act, compared with 9% who expect rents to fall.

The research found that the typical renter is paying £917 a month, 11% more than a year earlier. Among tenants who had lived in their property for at least a year, 46% had experienced a rent increase during the previous 12 months.

Mark Long, founder and director of Pegasus Insight, said: “Landlords are already preparing for significant change under the Renters’ Rights Act, and the prospect of further tax changes in October’s Budget is adding to the uncertainty facing the sector.

“The growing concern about the courts should also give policymakers pause. The new possession regime will depend heavily on a court system landlords can have confidence in, so ensuring it has the capacity to cope must be a priority.

“The Private Rented Sector needs a period of stability. Further tax increases or additional costs could change landlord behaviour in ways that ultimately affect tenants through higher rents, reduced choice or fewer homes available to rent. The Budget should not add to those pressures.”