Landlord Exodus Sparks Policy Reevaluation in New Zealand and Portugal

Portugal and New Zealand Take Steps to Support Landlords

Portugal and New Zealand have made significant changes to their landlord laws, aiming to encourage buy-to-let investment. These moves are seen as a lesson for the UK, where stricter regulations are being introduced despite concerns about their impact on the housing market.

In New Zealand, the government has reversed a five-year ban on no-fault evictions. This decision came after a significant number of landlords left the sector, leading to a shortage of available rental properties. The new rules allow landlords to end a periodic tenancy without a specific reason if they give 90 days’ notice. They can also end a tenancy with less notice—42 days—if they or a family member is moving back into the property. For fixed-term tenancies, landlords can end them at the end of the term without cause.

Meanwhile, in Portugal, the government is consulting on plans to cut income tax for landlords. This follows the failure of tougher legislation that had a negative impact on the rental market. Experts believe that these changes could help sustain supply and encourage long-term investment.

Impact on the UK Housing Market

The British Government is proceeding with stricter regulations on buy-to-let investors, despite warnings that this could lead to higher rents. From May 1, Labour’s Renters’ Rights Act will come into force, banning no-fault evictions and leaving landlords with waits of up to eight months to regain access to their homes.

This policy has already led to many landlords leaving the sector. In July, 22% of all newly listed homes for sale in London were former rentals, according to analytics firm TwentyCi. This figure has risen from 15.6% in July 2023 and 12.9% in July 2019. The declining supply of rental properties has pushed rent in London to a record £2,736, according to property website Rightmove.

Ben Beadle of the NRLA warned that the Renters’ Rights Act could be a "disaster waiting to happen." He pointed out that landlords are already facing long waits to regain possession of their homes, and the situation could worsen once the act is fully implemented.

Paul Shamplina, founder of the Landlord Action campaign group, questioned why the UK is moving in the opposite direction compared to New Zealand and Portugal. He noted that both countries have taken steps to support landlords, which the UK has not done.

Lessons from Other Countries

New Zealand’s experience shows the consequences of policies that drive private landlords away. After a landlord exodus hit supply levels, the government reintroduced no-fault evictions. Greg Tsuman, head of lettings at Martyn Gerrard estate agents, said this serves as a clear case study of what happens when policy pushes landlords out of the market.

Megan Eighteen of the Association of Residential Letting Agents Propertymark highlighted the importance of supporting landlords rather than penalizing them. She emphasized that increasing regulation and taxation without support risks shrinking supply and driving up rents.

In Portugal, the government has proposed reducing income tax on residential rental income to 10%. This includes a 0% tax rate for rents that are at least 20% below local averages and reduced rates for longer leases. These changes aim to make renting more attractive for landlords.

Taxation and Profitability

The UK’s approach to taxation has raised concerns among landlords. Chancellor Rachel Reeves increased property income tax by 2% in the Budget on November 26. This means property income will be taxed at 22% for basic-rate taxpayers, 42% for higher-rate taxpayers, and 47% for additional-rate taxpayers for the 2027-28 tax year.

Greg Tsuman said the UK’s tax regime is “untenable” and that the growing burden on landlords has already led to a decline in the market. He added that the 2% tax increase is “much worse” than the headline rate, making it difficult for landlords to find profit.

More recently, New Zealand has allowed landlords to charge a “pet bond,” which can be up to the equivalent of two weeks’ rent, to cover potential damage. This has been a contentious issue in the UK, where pet clauses were part of the debate around the Renters’ Rights Act.

Challenges with Pets

Michaela Anaka, a landlord, shared her experiences with tenants who kept pets. She described how former tenants kept two XL Bully dogs in a small flat, causing significant damage and distress to other residents.

Paul Shamplina of Landlord Action said the weight of regulation in the UK has pushed some landlords to the point where they feel unwanted. He argued that the UK needs to recognize the crucial role landlords play in housing delivery.

Megan Eighteen added that international governments are increasingly recognizing the need to support responsible landlords to tackle housing shortages.

Play The Telegraph’s brilliant range of Puzzles - and feel brighter every day. Train your brain and boost your mood with PlusWord, the Mini Crossword, the fearsome Killer Sudoku and even the classic Cryptic Crossword.