Tenants face potential rent increases of between 20 and 30 per cent as a result of tax rises hitting landlords, says a former independent member of the Bank of England’s Monetary Policy Committee.
David Miles, now Professor of Financial Economics at Imperial College London, says he wants the current three per cent stamp duty surcharge and the imminent start of the phased reduction of landlords’ mortgage interest tax relief to be abandoned.
Miles says “rents would need to rise between 20 and 30 per cent” to offset the impact of the government’s measures.
Addressing the argument made by the previous Chancellor that the tax changes are about making it easier for first time buyers to enter the market, Miles says that “aspiring first-time buyers are hardly helped by squeezing the supply of rental property and driving rents up.”
He concludes by warning that “It’s strange to believe that having households channel more of their savings into US government bonds or into equity issued by German companies is to be preferred to their investing in providing rented accommodation in the UK.”
Miles’s analysis is included in the latest comments by the Residential Landlords Association which claims a majority of landlords will be negatively impacted by the tax changes.
The RLA wants the government to use the unexpected extra revenue from its stamp duty levy to halt the implementation of the mortgage interest changes, or at least apply it only to new borrowing for new housing.