The impact of changes to Mortgage Interest Relief on renting to Under 35’s

The impact of changes to Mortgage Interest Relief on renting to Under 35’s

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Ongoing changes to Mortgage Interest Relief (MIR) represent a major adjustment to the way that landlords operate. Between 2017 and 2020 the amount of tax relief which landlords can claim will be limited to 20 per cent, rather than 40 per cent or 45 per cent which was previously claimed by those with higher gross incomes.[1] However, little is known about how landlords might respond to these changes. One of the few research projects on this topic concluded that landlords had a “strong commitment to the private rented sector” but that the impact of MIR changes was likely to be “very varied across the sector”.[2]

Recent research by ourselves at Sheffield Hallam University[3] has sought to address this gap and understand how MIR changes might affect the lettings strategy of landlords. In August we published research on landlord perceptions of letting to under-35s which was based on a survey of almost two thousand landlords and agents. We have now re-analysed data from the survey to investigate how our respondents view the changes to MIR.

Our survey findings suggest that around one in five landlords (19 per cent) think that the MIR changes will make them less likely to let to under-35s. More detailed analysis suggests that both the impact of MIR changes and landlord responses to them are likely to vary considerably across different groups. It appears that there may be a particular impact on landlords with larger portfolios (see Figure 1). Almost one-third (31 per cent) of landlords with larger portfolios stated that MIR changes would make them less likely to let to under-35s.

Less willing to let to under-35s due to MIR by size of portfolio

Figure 1: Less willing to let to under-35s due to MIR by size of portfolio[4]

A disproportionate impact on larger landlords is worth noting as it could have a number of implications. The first possible impact relates to the overall number of properties held in larger portfolios. A change in lettings strategy by even a small number of landlords with large portfolios could have a noticeable impact on the availability of accommodation – particularly in relation to under-35s who were the focus of our survey.

A second impact relates to the different sub-markets within the private rented sector. The survey suggests that MIR changes might have a greater impact on landlords letting to particular sub-markets, most notably claimants of Housing Benefit and Universal Credit. This is concerning given the pressure that already exists in relation to accessing accommodation for Housing Benefit and Universal Credit claimants. Our findings fit with previous research which has found that landlords who let to these claimants tend to have larger portfolios.[5]

The third possible impact relates to landlords who have decreased their portfolio. It appears that landlords who have decreased their property portfolio over the last five years are most concerned about the impact of MIR changes on their lettings strategy. The most likely implication is that MIR changes are the final straw for some landlords who were receiving only marginal financial returns on their properties. For example, in response to open-ended questions one respondent stated that the “loss of mortgage interest relief is by far the greatest risk to landlords “.

The survey also suggests that reversing changes to MIR could change the intentions of many landlords. More than half (58 per cent) stated that reversing the MIR changes would make them more likely to let to under-35s. Respondents with larger portfolios were more likely to state that reversing MIR changes would lead to them being more willing to let to this group of tenants. We face major challenges in providing accommodating for under-35s. These problems mean that the likely impact of MIR changes needs to be carefully considered.

Dr. Ben Pattison, CRESR, Sheffield Hallam University – @bmpattison @CRESR_SHU

[1] HMRC (2016) Changes to tax relief for residential landlords,

[2] Clarke & Heywood (2017) Landlord portfolio management – past and future, p.22 & 23,

[3] Pattison & Reeve (2017) Access to homes for under-35’s: The impact of Welfare Reform on Private Renting,

[4] n=1662

[5] Cole et al (2014) Local Housing Allowance: monitoring the impact of changes,

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Dr. Ben Pattison

Ben is a Research Fellow at the Centre for Regional, Economic and Social Research within Sheffield Hallam University. His primary methodological expertise is the quantitative analysis of secondary data sources. These methods have been applied to a wide range of research interests including the private rented sector, Housing Benefit, Community-led housing, housing affordability and regeneration. Ben is a member of the executive committee of the Housing Studies Association.