A Conservative peer has criticised the government's ongoing attacks on the private lettings industry saying that the Cameron administration should be nurturing landlords and not deterring them.
Lord Howard Flight says that between 1996 and 2013, some 83 per cent of all new dwellings created in England were in the private rented sector, the majority of which were created by investment from individual landlords.
"Yet over the last year the Treasury has embarked on a fiscal attack on those small companies and individual landlords, in the name of levelling the playing field with home owners. The reasoning is that landlords are occupying or buying up too many homes and so restricting access to affordable stock for would-be home owners and that buy-to-let investors, unlike owner-occupiers, enjoy the full tax-deductibility of interest on mortgage finance costs" Flight says in an article in the Daily Telegraph.
The article - written before the Budget in which residential landlords were singled out as not receiving the discounted Capital Gains Tax applying to other investments - goes on to suggest that the government is creating a false choice between helping prospective owner occupiers and tenants.
"There is little, if any, evidence to demonstrate that home owners and buy to let investors are chasing after the same properties" insists Flight.
"Owner occupiers have the tax benefit of capital gains free of Capital Gains Tax and no tax liability on the rental value of their occupation. Smaller landlords are good at buying up and refurbishing older properties which are less sought after by owner-occupiers. The danger is that the increase in taxes recently imposed will dissuade smaller landlords from investing in such properties, leaving them to stand empty, and bringing back housing blight to some areas" Flight writes.
He concludes by saying that at a time when the cost of a deposit is also increasing – with the average required for a first-time buyer being just under £33,000, according to the Halifax – the Chancellor’s tax moves "are counter-productive."
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In most cases the buy to let landlords and the first time buyer do not come into conflict. Landlords as the article mentions buy "bad" properties and renovate them as these are the cheapest and generally un mortgageable. Private landlord have massively helped to turn around ex local authority blocks or crumbling property in depressed areas that were once "no go" areas by investing in essentially decent but unloved property that successive governments have seen as a millstone around their necks, rather than a valuable commodity. Hitting the smaller landlords hard and giving the tax breaks to those with over 15 properties who have them under the banner of a company, is pretty typical of Mr Osborne"s aim of not taxing the very rich. In the case of landlords who take a huge risk on investing in property others won't or cannot invest in, removing the tax relief on mortgage payments will ensure many of these properties are not profitable; they will remain un inhabitable and un mortgagble, job well done . How does a government claiming to have housing in its sights fail to see this fact ? Easy.... they are quite out of touch.
Tenants want decent property at an affordable rent, I would like to see a change in the system to allow landlords to offer 5 year tenancies without granting the tenant any further rights than those in a typical AST. At present any agreement over two years grants tenants rights. Why is no one talking about this. Granting a five year lease could lower rents as the usual empty periods would be fewer and most landlord I know tend not to put the rent up for good tenants who look after the property and pay the rent. This single change would help families who rent and want stability as well as students who do not want to move three times during their degree.
A 5 or 6 year AST is usual in Germany where rental costs are lower and quality of accommodation is better than the uk.
Well written Paul, and still we wait for a response from HMG which as I see it , now overdue by 2 days . Is something going on behind the scenes is thee a deal being hatched ??
P D - the elected dictatorship most people call the elected government do as they damn well please as all dictators do and say this is what we are doing and there is nil you can do about it. P C hit the nail on the head but who will notice?
I agree there should be a response from HMG and I see nothing in these columns. About time Letting and Landlord Today followed this up and let us have some information. But they only write about what they want to. We shall see how they respond.
As well as the negative short-term effect of this type of policymaking, I fear for the long-term uncertainty it may cause.
As ARLA's David Cox has observed, this is the third budget that attacks landlords. None of the problems that the budgets create for investors are insurmountable, but fear of what the government might announce next could harm the sector just as much as a direct legislative attack.
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