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Iain Duncan Smith speaks out in support of private landlords

Many buy-to-let landlords will undoubtedly commend former Tory leader Iain Duncan Smith for slamming anti-buy-to-let legislation introduced by the former chancellor George Osborne for failing to support private landlords who he has described as “a significant provider of the additional housing we need”. 

In a Conservative Home article, yesterday, he said it was time to “reconsider the way we treat private landlords who buy houses to rent”.

He pointed out that many buy-to-let landlords are now opting not to add to their property portfolios, deterred by the tax changes introduced by his own party, at a time when significantly more homes are needed in the private rented sector.

He wrote: “A large number of them [private landlords] are talking about no longer buying to let, and they blame it on George Osborne’s decision to impose a stamp duty levy on the purchase of homes to rent, to restrict mortgage interest relief to the basic rate of income tax, and to tax a landlord’s turnover rather than profits.

“This, they believe, has led to private landlords scaling back their operations or even leaving the sector altogether. We should all be concerned about this, because private landlords are a significant provider of the additional housing we need.” 

Duncan Smith acknowledged the government’s plan to build 300,000 more homes a year, but pointed out that this level of housebuilding cannot be achieved overnight.

“We won’t be able to provide all the housing in the medium term through aggressive building programmes alone. We will need other sources of accommodation, as well,” he added. 

You can view the full article by clicking here

  • Andrew McCausland

    ABOUT BLOODY TIME!!

    Representatives of the PRS have been saying this for 3 years, ever since the changes were first proposed. I can live with the surcharge on SDLT as any new buyer knows the maths when they buy into a property now. What is unacceptable is the S24 changes that push landlords into a higher tax bracket and, at times, make the marginal rate more than 100% of profit.

    IDS has finally articulated one of the inconsistencies in Tory housing policy. You cannot supply the housing the country needs without the active support of small scale landlords. Current taxation policy is forcing them out of the market just when the government needs them most.

    So well done IDS for finally accepting this view. I hope he is able to convince his colleagues of the error of their ways.

  • G romit

    some welcome support from the establishment who hopefully are starting to realise that Osborne's tax changes will turn a housing crisis into a housing catastrophe.

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    • 20 July 2017 09:29 AM

    Thank goodness we have an intelligent voice from the higher echelons on this matter. Section 24 is the biggest existential threat now looming over the private rented sector. The additional costs of S24 (that is, higher tax burden) will be shared, if only in part, by the tenants. You cannot compress water. If you push the profit line in one area it will be recouped in another. In the next two years many tenants are going to wake up in between a rock and hard place. The rock will be a pressure on their rent costs and the hard place will otherwise be eviction for the property to be sold, as now being no longer profit generating asset. We are already 25% of the way into this calamity and next year we will be halfway in as 50% interest relief becomes disallowed. This scenario is already in play, it started 1st April 2017. Section 24 has to be repealed before it is too late.

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    The trouble is if you keep the status quo, your tenants will pay anyway. The choice of the tenant is either:

    1) Higher rent because interest relief is eroded; or
    2) Higher taxation to cover the shortfall from rent relief, essentially to subsidise the acquiring of assets by landlords and in so doing paying for their continued exclusion from the housing market.

    Also, the weakness in the interest argument is that it is extremely variable. Some landlords will be highly leveraged whilst some will own their properties outright. In the end, they will be forced into market equilibrium. It can't be assumed that interest costs are passed on, because the highly leveraged will be at an extreme disadvantage in the market. Also, given the profitability of the market by some landlords, it could be pointed out that we already have demand pull rather than cost push pricing and this will persist.

     
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    The flaw in Duncan-Smith's argument is that he assumes the private rental sector is the only way that demand for housing can be met. In taking this approach, he is attempting to treat a symptom of the UK's housing shortage rather than its root cause.

    What an awful lot of landlords fail to appreciate is that:

    1) Most of their tenants would rather own their own home rather than rent;
    2) That it is the role of Government to ensure social order and democracy and not to serve one economic interest to the detriment of another.

    Government policy in its current form serves the majority who wish to own their own home in that it seeks to address the housing shortage through a series of incentives to build more (e.g. help to buy equity loans, shared ownership) and disincentives to building up property portfolios from existing stock (e.g. higher stamp duty on second homes, tax on investment halfway towards equity with investors in shares and bonds etc). Also, whether they like it or not, this policy serves those who want to own as residents and not those who wish to own in order to exacerbate shortages and increase returns.

    Government policy also recognises that the letting market is not particularly healthy to the UK's economic strength. It doesn't produce anything and it is motivated by shortages. Pushing investors towards investment in businesses that produce goods and services is much healthier for a sustainable economy and hopefully the government will consider increasing taxation on the buy to let market further in order to fund further cuts to taxes on investments in the securities markets.

    Buy to let landlords might not appreciate this shift but they need to appreciate that the cost of housing today has become detrimental to the wider economy and the growth in aspirational middle class people forced into renting long term threatens the social order. What we have today might be less convenient than three years ago but without these measures, it would only be a matter of time before Jeremy Corbyn reached Number 10.

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    • 07 August 2017 09:06 AM

    We actually checked with all tenants (double digit portfolio) and the vast majority did not want a mortgage. Many were elderly an the rest were transitory younger people chasing their careers and moving about.

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