Balancing the books but ignoring the rent: Reeves budget still misses Britain’s housing crisis

Tenants are no better off than under the last government, and the situation will only deteriorate as ministers refuse to tackle the root cause: a rental market shrinking faster than demand can rise, with private landlords pushed out long before any viable replacement exists.

At the heart of this crisis for renters is whether responsible housing providers can operate sustainably under the new regulatory environment while attracting the investment needed to replace capacity lost after a decade of punitive policies aimed at shrinking the Private Rented Sector (PRS).

A combination of policy choices has sent what appears to be a clear message to landlords that they are no longer wanted. First came the restriction on finance relief introduced by the previous government, followed by stamp duty surcharges, increasingly complex licensing regimes, and now the Renters’ Rights Act. Most concerningly, Budget rumours of yet another tax blow through National Insurance threaten to push even more landlords out.

What the Government seems unwilling to grasp is that this pressure falls squarely on tenants. Landlords either raise rents to cover extra costs or sell up, shrinking supply and leaving tenants with fewer homes, less choice, and higher rents. It is beginning to look as though ministers believe tenants would somehow be better off without private landlords at all, and are content to cash in on the exodus while it unfolds.

The rumour that the Budget will add National Insurance to rental income may, to Treasury Officials, look like an easy political win - a way to rake in tax from capital gains when landlords inevitably sell their properties - but the cost will fall squarely on renters. It is a short-sighted raid dressed up as fiscal responsibility.

The most balanced way forward in today’s economic climate would be to tax profit rather than gross rental income, raising HMRC revenue without destabilising the wider housing market. Most landlords – often working people or retirees - wouldn’t object to paying a fair tax, similar to other sources of income. The key is treating landlords as businesses and taxing their allowed profit at the same rate as any other income. Applying National Insurance in this context is entirely reasonable, so long as the effective rate is similar to other marginal rates of tax. Under the current tax treatment, it is possible for the effective rate to exceed 100% - which is entirely nonsensical.

The wider issue is that there is currently no viable alternative to the PRS. The government has yet to deliver on its manifesto pledge of 1.5 million new homes, and the private rental sector has failed to keep up with rising demand for some time, leaving less choice and higher rents for tenants. This falls disproportionately on the most vulnerable in our society. These are the very people who voted for Labour and are relying on them for stability, protection, and support.

The current government could learn from the last Labour government. Under Blair, boosting rental supply increased competition, improved quality, gave tenants more choice, and kept rents in check while house prices rose faster. Now, we’re seeing quality dropping, standards being legislated to stay passable, and landlords unable to absorb extra taxes or regulations selling up.

You cannot deliver affordability and growth without supporting tenants and landlords together. Treating them as separate has created this crisis, and prioritising fiscal optics over renters’ realities will only make it worse.

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Greg Tsuman is the Managing Director for Lettings at Martyn Gerrard Estate Agents

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