It won’t have escaped you that it’s pre-Budget speculation season and lots has been said about proposals to apply National Insurance to rental income.
According to forecasts, the Treasury could raise £2bn to help fill a £40bn economic deficit by taxing ‘unearned income’.
While we can sympathise with Rachel Reeves’ dilemma, the rhetoric surrounding this proposal is unhelpful. Labelling rental revenue in this way downplays the financial commitment landlords take on when spending time and money running lettings businesses.
Additionally, this viewpoint fails to recognise the critical societal and economic role that they play in providing homes for millions of renters who can’t afford or don’t want to buy.
Like any investment, buy-to-let businesses are there to make money, whether that’s through a regular, reliable income stream or capital appreciation. Nevertheless, private rented sector landlords are enablers of mobility, education and public service.
Their properties house students who are building the skills the economy needs, and key workers who keep our hospitals, schools and infrastructure running. These tenants rely on accessible, well-maintained accommodation near their places of study or work, and landlords seek to meet that demand.
In university towns and cities, landlords are helping to bridge the gap between institutional housing and private need. Although purpose-built student accommodation schemes are gaining momentum, there remains a shortfall of beds. Students often face limited options when it comes to halls of residence, with anecdotes of undergraduates having to live in neighbouring towns; private rentals offer a more flexible, affordable alternative.
Many landlords tailor their properties to suit student life, offering shared accommodation, inclusive bills and proximity to campus. This isn’t just about yield, it’s about understanding the rhythms of academic life and responding with practical solutions.
The same applies to healthcare professionals. From junior doctors to support staff, many rely on rental housing close to hospitals and clinics. Shift work and long hours make location critical, and landlords who invest in these areas are helping to ensure that vital services remain staffed and accessible. Their contribution goes beyond bricks and mortar; it’s about enabling continuity in care and supporting the wellbeing of those who deliver it.
Hot spots
This strategy of targeting areas with strong demand from students and key workers is not just socially valuable, it’s financially sound. Cardiff’s CF24 postcode, for example, topped recent buy-to-let hotspot rankings with average gross yields nearing 9%.
More than four in ten homes in the area are rented, and around a quarter of residents are students. The presence of institutions like the University Hospital of Wales and Cardiff Royal Infirmary makes it a prime location for landlords seeking both reliable tenants and meaningful impact.
Plymouth’s PL4 postcode follows a similar pattern. With three universities and Mount Gould Hospital nearby, it offers some of the UK’s highest gross rental yields, averaging 10.2% annually.
Loughborough’s LE11 postcode also stands out, driven by university demand and a dependable tenant base more broadly, with gross yields around 8%. These figures demonstrate that landlords who align their investments with the needs of essential industries are not only supporting communities; they’re making smart business decisions.
Zooming out, the South West region, led by Plymouth, has seen the strongest growth in average gross rental yields, rising by 0.79 percentage points over the past year to reach 8.06% by the end of June. Nationally, gross yields remain resilient at 7.11%, close to historic highs. This resilience reflects the strength of demand in areas where landlords are meeting real housing needs.
It’s also worth noting the types of properties landlords are choosing. Terraced houses are particularly popular due to their versatility. Many can be converted into HMOs, allowing for multiple tenancies and higher yields, while still functioning as family homes when needed. This flexibility is valuable in a market that continues to evolve and adapt to shifting demographics and economic pressures.
The idea that rental income is ‘unearned’ ignores the reality of what landlords do. Their work is not passive, far from it; in addition to the day-to-day running of their letting businesses, they work at a strategic level, researching locations and specific markets, managing risk and navigating a complex regulatory landscape and tumultuous economy.
In doing this, landlords provide a service that underpins much of the UK’s social and economic infrastructure. Whether it’s a student settling into their first term or a nurse arriving for a night shift, landlords are part of the story.
As the housing landscape continues to evolve, it’s time to recognise the full scope of their contribution. They are not passive rent collectors; they power the UK’s essential industries through thoughtful, responsive investment.
Louisa Sedgwick is managing director mortgages at Paragon Bank
