Yahoo Finance Michael Gove faces backlash for ‘fearmongering’ landlord comments
Michael Gove is facing a backlash after labelling landlords increasing rents to keep pace with rising mortgages as “unscrupulous”.
The Levelling Up Secretary said on Sunday that it was not acceptable for landlords to put up rents above inflation, as he discussed changes in housing that will “empower tenants” to challenge large bill increases.
Speaking to the BBC, Mr Gove said a “minority of unscrupulous landlords are using the threat of eviction to jack up rents and victimise tenants”, promising a crackdown.
But the National Residential Landlords Association said the Housing Secretary's comments were “overstated” and anti-landlord rhetoric was being used to “whip up fear”.
The trade body added rising borrowing costs and a string of punishing tax reforms had left landlords with no choice but to raise rents above inflation, which is currently at 10.4pc, or risk their business collapsing.
It comes alongside fresh research showing how large numbers of landlords have been forced to raise rates, owing to economic pressures, rather than out of greed.
One in six (17pc) landlords have increased rents by at least 15pc this year, according to Hamptons estate agents.
More than one in 10 (11pc) have upped rents by 20pc or more. The proportion rose to one in six (16pc) in London and Yorkshire and the Humber, the research found.
Chris Norris, of the National Residential Landlords Association said it was “completely understandable” that tenants were fearful of rent rises, but said comments from Mr Gove reflect the efforts of campaign groups to “whip up fear” about no-fault evictions.
He said there were many cases where landlords were having to raise rents above inflation to keep their properties economically viable.
He added very large increases were more common among landlords who have not increased rents for years while interest rates remained low, or offered discounts during Covid, particularly in cities like London where demand slumped.
“In reality, they [evictions] are used when something in that tenancy has broken down, not a tool to say ‘I'm putting the rent up or else.’ That was potentially overstated,” he said.
Ray Boulger, of mortgage broker John Charcol, said nearly half of landlords have mortgages and are under pressure because of higher mortgage rates.
He said the Government has also played a role in increasing rents by removing tax relief on mortgage interest payments for landlords who own properties in their own names.
This took effect in 2020 and has pushed up their costs, forcing some to increase rents while others exited the market altogether.
He said the rents would continue to go up as landlords come to remortgage at the end of fixed rates secured during a period of much lower interest rates.
Landlords are also being forced to bump up rents to pass lenders’ stress tests.
To get a buy-to-let mortgage, basic-rate taxpayers and limited companies need to show that the rental income covers 125pc of the repayment costs. For higher-rate taxpayers this metric known as an “interest coverage ratio” – ICR – is set at 145pc.
Properties with an ICR below 110pc will become unmortgageable and could be moved on to more expensive standard variable rates.
A spokesman for the Department for Levelling Up, Housing and Communities said: “We are absolutely committed to delivering a fairer deal for renters and our reforms will empower tenants to challenge above-market rent increases, as well as putting an end to section 21 no fault evictions.
“Responsible landlords have nothing to fear from these reforms.”
