The government should resist imposing further costs on landlords in the budget or risk adding to the financial pressure already facing tenants, says Pegasus Insight.

With the Budget taking place on 28 October, the latest landlord trends research reveals widespread concern among landlords about the cumulative impact of tax and regulatory changes affecting the private rented sector (PRS).

Research found that 88% are concerned about the 2% rise in income tax rates applying to rental income from properties held in personal names, an increase of three percentage points since the previous quarter.

Landlords indicate that the consequences will not necessarily be absorbed within their businesses.

Almost two thirds (64%) say they will look to recoup losses through higher rents, while 83% agree that tax and regulatory changes will make them more selective about the tenants to whom they are prepared to let.

Pegasus’ research also found that worry about the practical operation of the new regime under the Renters’ Rights Act is also significant.

It found 91% of landlords are ‘very concerned’ about potential court backlogs when seeking to regain possession of a property.

Previous Pegasus research has already highlighted the sensitivity of landlord behaviour to changes in taxation and regulation, with landlords responding by selling property, incorporating or delaying further investment.

Against that backdrop, Pegasus says the latest findings suggest further tax increases in the budget could have consequences beyond landlords themselves.

Pegasus Insight’s tenant trends research indicates that renters are already conscious of the potential for additional landlord costs to feed through into rents.

More than a quarter of tenants expect rents to rise as landlords pass on the cost of complying with the Renters’ Rights Act, compared with just 9% who expect rents to fall.

Pegasus Insight founder and director Mark Long says: “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 PRS 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.”