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Buy-to-let tax changes pose ‘real risks for tenants’

Tenant evictions could rise sharply in the coming months amid reports that many buy-to-let landlords plan to increase rents next year to offset tax hikes from April 2017, according to a former member of the Bank of England’s Monetary Policy Committee.

Dame Kate Barker, who authored an independent review of UK housing supply for the government, issued the warning to the Treasury Select Committee on Wednesday.

As many of you know, the existing rules that permit landlords to offset all of their mortgage interest against tax will, from April 2017, be phased out, restricting the amount of mortgage interest landlords can offset against tax on their property investments.

By April 2020, once they have been withdrawn altogether, the disastrous consequences of Section 24 will mean that it is likely that higher-rate tax payers will only receive 50% of the relief that they currently get, with various experts having already warned that landlords will be left with little alternative but to pass higher costs on to tenants.

With many landlords likely to face the prospect of having their profits unjustly wiped out, the majority of landlords will have no option but to recoup their losses through higher rents, with tenants ultimately paying the price of the government’s unfair tax-grab.

When pressed about the impact of recent tax changes affecting landlords, Dame Barker warned that many long-term tenants could find themselves facing steep rent increases or being forced to move “because the buy-to-let landlord no longer finds the yield acceptable or can’t afford it”.  

Responding to the new report and Dame Barker’s comments, the Residential Landlords Association (RLA) is now calling for protections for tenants already in rented housing by applying the mortgage interest relief changes only to new borrowing rather than to existing holdings.

Alan Ward, chairman of the RLA, said: “Dame Kate’s warning is a sober reminder of the potential social consequences of forthcoming changes to mortgage interest relief.

“These changes pose real risks for tenants where their landlord is simply unable to afford the extra costs being imposed on them and has no option other than to sell a property.

“Even at this late stage we would call on the government to apply the changes only to new borrowing.”

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