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Landlords have made £177bn profit from capital growth over the past five years according to research which adds fuel to the political debate about rising house prices in the UK.
There has been growing demand for rental property in Britain as high prices and a lack of new housebuilding have made it harder for first time buyers to get on the property ladder.
As well as a rise in the number of tenants this has led to more buy-to-let landlords, and they have been the biggest beneficiaries of rising house prices according to the figures from property adviser Savills.
Alex Hilton, director of Generation Rent, a group that campaigns for the rights of tenants, said Savills’ figures were “stomach-wrenching”.
It was wrong that landlords were able to “cream generous tax breaks” at a time when tenants were enduring the effects of government spending cuts, he said.
The total value of privately rented housing in Britain has grown 57 per cent since the financial crisis, topping £1tn this year for the first time, although some of that growth reflects the increasing number of people buying homes to let.
The profit figure of £177bn is an estimate of capital growth alone and excludes income from tenants’ rents — another source of wealth for landlords.
By contrast the total value of UK housing held by owner-occupiers with mortgages rose just 5 per cent in the past five years, Savills found.
Lucian Cook, director of residential research at Savills, said the data showed that “the benefit of recent house price growth has become increasingly concentrated in the hands of private investors”.
He added: “In a housing market that is expensive, relative to people’s income, it is difficult to see how this will change, particularly given increased mortgage regulation.”
The findings showed that the rental market was “fundamentally unsupplied”, Mr Cook said. In order to mitigate the situation the government should do more to encourage professional investors to build more new homes for rent, he argued.
Rising house prices are also fuelling Britain’s housing benefit bill, as landlords raise rents in order to pay off their own borrowings. In the 2013-14 financial year the country paid £9.3bn to private landlords to subsidise tenants’ rents — more than a third of the total spent on housing benefit that year.
Private sector tenants live in the country’s poorest quality accommodation and have the highest housing costs, with rents taking up an average 40 per cent of gross income, according to data published in the summer.
Mr Hilton said the figures showed “how landlords have profiteered from the undersupply of housing while tenants struggle with ever higher rents.
“Despite these huge returns, private sector tenants get the worst living conditions, the worst security of tenure and the least affordable housing, often cutting back on food or heating to meet the rent.”
Labour has proposed cracking down on landlords by capping rents and banning buy-to-let investors from purchasing newly built properties in some new “housing growth areas”.
The Savills figures are likely to prompt closer scrutiny in Westminster of the tax breaks enjoyed by landlords — and not only by leftwing politicians.
Charlie Elphicke, Conservative MP for Dover, said there was a strong case for ministers to call a halt to relief on mortgage interest, for example, and look at other perks such as wear and tear allocations.
“Most people would say that is money which could have gone to people owning their own homes rather than investors,” he said. “It underlines that tax breaks that buy-to-let investors get would be better off used to help first time buyers to own their own homes.”
Clive Betts, who chairs parliament’s communities committee, said the figures demonstrated the need for more homes to be built. “In the end you can take away tax breaks and other aspects of housing finance but you will never combat the problem of rising rents and rising prices without building more homes,” he said.