Taxing landlords in the forthcoming spending review would make the housing crisis worse according to property firm DJ Alexander.

Speculation that landlords could be targeted in chancellor Rachel Reeves’ forthcoming spending review has prompted the lettings agency to warn that such a move would result in reduced investment in the sector, the prospect of a fall in the number of landlords, and higher rents for tenants.

As Reeves seeks to increase revenues from a broad range of sources, there has been speculation that she is considering levying a new class of National Insurance (NI) on landlords, and could also introduce VAT on residential property lettings.

David Alexander, chief executive officer of DJ Alexander Scotland, commented: “Once again landlords and property investors are being seen as easy targets for raising finance for the government. The last decade has already seen them subject to a series of ever more punishing tax and regulatory changes and now they have come back for more.

“The problem the government has is that landlords and property investors can simply exit the market. They may project that by adding VAT or introducing a landlord income tax that this will produce a quantifiable annual levy based on current incomes. However, if many leave the sector, restructure their businesses, or put up prices for tenants to cover the extra taxation then the projected gains will not occur. 

“The outcome of this kind of taxation would be that it would not help those needing a home and will, instead, exacerbate the current housing crisis.”

Alexander added: “At a time when demand is unprecedented, when tenants are facing delays in finding appropriate homes, and when property investment is being put on hold due to uncertainty over future returns, this is not the time to make the market more difficult for landlords.

“Instead, the government should be working with the sector to make it more attractive to invest, to grow the market, and to improve investment conditions for landlords and property investors. By doing this the private rented sector would grow, landlords would invest, and tenants would benefit. This would be a win-win situation for all and would immediately start to address the current housing emergency.”