Loss of higher rate tax relief and tighter regulation on buy-to-let could harm tenants more than landlords by constraining the supply of rented property.
Combined with population growth and low housing supply, this can only push up rents, according to a new report from the Intermediary Mortgage Lenders Association (IMLA) warns.
The report – Segmenting the UK mortgage market – looks at the key issues facing the main segments that make up today’s mortgage market: first time buyers, moving homeowners, buy-to-let investors, lifetime borrowers, remortgagers and further advances.
The IMLA said that July’s buy-to-let tax changes will put a greater burden on landlords and push them into making losses after tax.
This will raise the effective tax rate on their buy-to-let above 100%.
It may also slightly skew the market in favour of owner-occupied house hunters, by reducing the price that landlords are prepared to pay for any given property.
Alongside tighter mortgage regulation, this will constrain the supply of available rental properties at a time when population growth and low housing supply are driving demand.
The IMLA report also showed that buy-to-let has enjoyed the most "robust recovery" of any mortgage market sector this year, although lending volumes remain 40% below their 2007 peak.
IMLA executive director Peter Williams said: “Buy-to-let has been clawing its way back from a deep recession low as demand for private rental properties has grown.
“Until there is a broader policy push to tackle the chronic lack of supply, homeowners and renters in both private and social sectors will all remain vulnerable to the effects of the current lack of fully joined-up policy making.”