It's now three years since the government announced plans to phase in a radical reduction in mortgage interest tax relief for buy-to-let landlords. The implementation of the new rules began in 2017 and, although it will be 2020 before they take full effect, they?re already having a notable impact.

Coupled with the stamp duty surcharge on second properties, as well as tighter mortgage affordability and tougher underwriting requirements underpinned by the Prudential Regulation Authority (PRA), the new rules have dramatically changed the economics associated with owning rental property.

Landlords are responding in a variety of different ways, and distinct trends are emerging with an interesting read-across and a number of implications for the UK's Private Rented Sector (PRS).

First, it's clear that landlords are buying significantly fewer properties with buy-to-let mortgages. According to the latest figures from UK Finance, buy-to-let mortgages for property purchases in May 2018 were almost 40 per cent lower than before the changes were announced.

Next, landlords appear to be trimming their portfolios and reducing gearing. According to Paragon's long-standing PRS Trends survey, which tracks around 200 experienced landlords each quarter, landlords have cut their average portfolio from 14.9 properties down to 12.4 since 2014 and reduced gearing across their portfolios from around 40 per cent to 32 per cent. This makes sense in the context of the fiscal and regulatory changes because it helps maximise access to lower LTVs, lower interest rate mortgage deals, and manages the tax burden down.

Remortgaging is another key trend: more landlords are opting for fixed rates and locking in for longer as they seek to minimise mortgage costs and maximise certainty. UK Finance figures show that almost 70 per cent of new buy-to-let mortgages in the last 12 months were for remortgages.

Finally, increasing numbers are turning to limited company structures. Although not suitable for all, incorporated landlords are not affected by the tax changes introduced in the 2015 summer Budget. Operating in a limited company allows interest costs to be deducted from rental income to arrive at the taxable profit, and for tax to be charged at the 19 per cent company tax rate.

In a recent report, estate agent Hamptons International said that a record 18 per cent of all rented properties in the UK are now being let out by companies rather than individuals ? an increase of four percentage points from the year before.

What the changes haven't done, however, is alter the fundamentals underpinning the rental market. Tenant demand is as strong as ever and tenants? need for flexibility, combined with too few homes, less investment in social housing and tighter mortgage affordability all continue to drive more people to seek a home in the PRS.

So far, one thing that landlords haven't done in any number is impose above inflation rent rises to absorb higher costs. However, if fewer landlords invest in rental property, tenant demand continues to rise and strategies already adopted to meet rising costs stop being effective, upward pressure on rents may build.

While landlords, at least, have a range of strategies to help them adapt to the tax changes, this is not necessarily the case for tenants. In order to ensure a steady flow of new property into the PRS we hope the government will guard against introducing any additional changes that could further dampen landlords? propensity to invest.