Exeter landlords warn rents could rise if Rachel Reeves imposes rental tax

Landlords and letting agents across Exeter are warning of serious repercussions for the city’s already strained housing market as Exeter Today understands Chancellor Rachel Reeves could consider imposing an 8 per cent National Insurance (NI) charge on rental income.

The move, part of potential fiscal reforms under the Labour government, could impact hundreds of small-scale landlords in Exeter, a university city with a high proportion of rental properties and rising affordability pressures for both students and private tenants.

According to recent figures, the average monthly private rent in Exeter now stands at £1,316, up 6.5 per cent from the previous year. A typical rental property is priced at £1,756 per month, while rents for flats and maisonettes have risen 7.2 per cent, and detached homes 5.7 per cent.

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Local agents say these rising costs are being driven by reduced supply, and any new tax on landlords could make the situation significantly worse: “This proposal would have a massive impact on landlords of all sizes, from small local owners to larger portfolio investors,” said a spokesperson for Francis Louis Estate Agents. 

“The reality is that landlords are already under significant pressure from rising costs, existing tax changes, an increased regulatory compliance burden, and the new Renters’ Rights Act.”

“An additional 8 per cent National Insurance charge on rental income would ultimately push many to increase rents or leave the market altogether, which means fewer available properties and higher costs for tenants.”

Adding to this, they said: “Exeter already faces a housing shortage, particularly for students and young professionals, so any policy that further reduces supply will only make an already difficult situation worse.”

The concern is echoed by Leamans Lettings which reports a sharp drop in available rental properties as landlords increasingly choose to sell up rather than relet: “We’re seeing landlords sell their properties when tenants move out rather than relet, which has led to a dramatic decrease in available rental homes,” a spokesperson said. 

“This has been a big financial hit to a small independent lettings company like ours, and we haven’t ruled out redundancies.”

Leamans cited the Renters’ Rights Bill and layers of new legal compliance as key reasons landlords are leaving the market, warning that the proposed NI charge could make matters worse.

“This is affecting both private residential and student markets. I can only assume that any National Insurance charge to landlords will further impact an already challenged rental market,” the agency added.

For some agents, the situation is “unprecedented.” Southgate Estate Agents said Exeter’s rental sector is under mounting pressure from both falling demand in student housing and high borrowing costs for landlords: “We’ve seen a significant volume of new student accommodation around the city, but at the same time, a drop in student numbers. For the first time in 20 years, we’re seeing empty student properties,” the agency said.

“Many landlords are already operating at a loss due to high interest rates and restrictions on offsetting mortgage interest. If an 8 per cent NI charge is applied to rental income rather than profit, it could push many over the edge.”

The estate agents added that long-term landlords are now offloading properties “on a significant scale”, while new investment buyers are scarce due to high stamp duty and low yields.

“It’s not rocket science - a shrinking pool of rental homes will drive up prices even further,” the agency warned.

Exeter’s rental market is already under pressure from strong demand, limited supply, and an influx of students and professionals competing for available housing. 

Analysts say that unless policies strike the right balance between fairness and investment incentives, the cost of living crisis for renters could deepen, with affordability becoming an even greater challenge across the city.