If you want an object lesson in how governments screw things up for the very people they claim to be helping, look no further than the residential buy to let market.

The pioneers of this market got started in the 1970s and 1980s, but it was the advent of readily available buy-to-let mortgages in the 1990s that caused the market to really take off. For more than 20 years it became the UK’s favourite investment. As interest rates fell, property prices rose so there was a double whammy of rental income and capital gains that contributed to a very nice return on investment.

Even the financial crisis of 2008 only caused a temporary blip, with savvy investors snapping up below market value homes from distressed sellers and the zero interest rate policy of the Bank of England making credit cheaper than in all recorded history. So, tens of thousands of people were ensuring their financial independence in retirement by having income producing assets that would be fully paid off by the time they reached their golden years. It was in their interests to look after their tenants so tens of thousands of families were able to put a roof over their head at affordable rents.

And then along came George Osborne. For reasons that remain unclear to me a decade later, he decided that private landlords, a cornerstone of Tory party support, were a valid target for a regulatory and tax vendetta that continues to this day. Section 24 changed the treatment of mortgage costs and led to a complex and expensive process of incorporation for anyone owning more than a few investment properties. Successive governments have kept on twisting the knife, whether that means licensing of HMOs or limits on how you can evict non-paying tenants. And the latest rules on energy efficiency are likely to cost an average of £10,000 per property while rendering some homes uneconomic and therefore unsaleable.

How do you imagine private landlords have reacted to this onslaught?  According to the latest report from Hamptons, they have chosen to retire from the sector and sell up their portfolios. Quel surprise!  Incredibly, 140,000 landlords retired in 2022 alone, accounting for 73% of all landlord sales. Instead of using these assets to reduce their reliance on the state in their later years, landlords have decided that the cost and hassle of providing accommodation is simply too stressful to bear so they are throwing in the towel.

Hamptons calculate that 96,000 landlords will turn 65 every year adding to the million or so who already qualify for their bus pass. And the trend over the last decade is clear – as they retire, more and more are tempted to sell rather than retain the investments they worked so hard to acquire. In 2012 they were selling around 70,000 properties a year, a figure that has now doubled and is still increasing. Buy-to-let was clearly a Baby Boomer generation obsession – even now 51% of all outstanding buy-to-let mortgages were taken out between 1996 and 2007. And here’s the critical point – as these boomers retire and sell up they are not being replaced by Gen X or Millennial landlords. These youngsters have witnessed the decade long War on Landlords and don’t find the private rental sector to be an attractive proposition.

Rising interest rates and the resultant increase in re-financing costs will drive more landlords out of the market – 45% of homes sold by landlords in 2023 were acquired more than 15 years ago. The proportion of sales also depends on the type of property people invested in. For example, the highest proportion of sales have been in low rise city centre flats in Greater London where rental yields have been steadily declining compared to other parts of the country.  60% of landlord sales in Redbridge having been owned for 15+ years, followed by 59% in Ealing, 58% in Harrow, 55% in Barnet and 53% in Enfield.

So we have a highly disgruntled private landlord community wilting under the weight of regulation, tax hikes and rising interest rates. Betrayed by their natural political leaders, they have become sellers in a softer market when they had assumed these assets would be part of their children’s inheritance. Presumably the beneficiaries of all this pain must be the people on the other side of the transaction – the tenants who live in these well cared for investments?

Economics 101 tells us that can’t be true. What happens when 140,000 properties a year are taken out of the sector and no new, young landlords want to take them over? If generation snowflake can’t afford to get on the property ladder, they’ll be forced to rent. But, wait a minute, thanks to the Tory vendetta there are far fewer homes available to rent. Rising demand and falling supply. What could possibly be the result? Ah yes, record rises in rents as people fight over the tiny amount of rental property that comes onto each local market at any time. According to Hamptons, ‘the number of rental homes on the market seems to have found a new normal at nearly two-thirds below pre-pandemic levels’.

Let me quote directly from the report: “Rental growth across Great Britain in March posted its third ever double-digit increase since the Hamptons Lettings Index began just over a decade ago in February 2014. Double-digit rental growth has only been recorded in May 2022, February 2023 and now March 2023.

In March, the average rent for a newly let home reached £1,236 per month. This is 10.8% or £121pcm higher than the same month last year. March saw the second fastest increase posted in any month after the 11.5% increase in May 2022.

Rental growth continues to be led by the capital, with average rents rising 16.2%, faster than anywhere else in the country. Inner London saw rents rise 18.5% over the last year to reach £3,046, with rents surpassing the £3,000 mark for just the second month running. Meanwhile the 15.6% growth posted in Outer London marks the fastest annual increase on record and takes average rents here to £2,013 per month.

The number of homes on the rental market stands 13% above last year’s record lows, but there are still 64% fewer homes available to rent across Great Britain than there were in March 2019.”

Things are even more dire north of the border, where the number of rental homes is down by 39% year on year. Perhaps Nicola Sturgeon can make the SNP’s £120,000 motor home available to a homeless family at a peppercorn rent?

Wow. Well done George Osborne. Is this what you wanted? I know you had a downer on amateur landlords, but did you really think that the big institutions would acquire hundreds of thousands of homes to make up for the shortfall from private investors leaving the market? Shorter question – did you think?  You and your successors are 100% to blame for this crisis in rental accommodation. You took a well functioning market where interests were aligned and you single-handedly nuked it.

In my recent talk at the Master Investor Show I highlighted the challenge for investors as financial markets become politicised. How can we know the fair price of government bonds if a central bank will pay any price to meet a political agenda? In Japan the bank even buys stocks and shares so the same question can be asked of the share price of Toyota or Sony. The politicising of the UK private rental property market has been an unmitigated disaster for both landlords and tenants. Once Kier Starmer and Co introduce rent controls in 2024 and the new insulation regulations begin to bite buy-to-let will truly be dead as an investment class.

I’d love to predict that the damage will end there. But with one think tank already recommending a lifetime limit on the value of ISAs it’s clear that there’s only one question savvy investors should be asking. What the hell will these incompetent bleep-bleeps turn their attention to next?

I’m off to take my sedatives.