The government’s decision to increase taxes for landlords over the past 18 months or so have been described as ‘profoundly wrongheaded’ because they will push up costs for tenants, according to ex-Bank of England policymaker, David Miles.
The government has attempted to create what the former chancellor George Osborne described as a “level playing field” between landlords and those buying homes to live in, by increasing taxes for landlords such as hiking duty costs, cutting mortgage interest relief, scrapping the ‘wear and tear’ allowance, among other measures. But Miles points out that this has left many landlords with little alternative but to pass costs onto tenants by pushing up rents.
The economist, who is now a professor of financial economics at Imperial College London, fears that fewer people will be willing to invest in the buy-to-let sector as a consequence of the tax changes, which will have a negative impact on housing supply in the PRS.
“I think these measures were introduced in order to try to help make housing more affordable for people who want to buy them, I think they are almost certainly wrongheaded,” said Miles at an event hosted by New City Agenda.
“I suspect that they will have a negative impact on the ability of young people to become homeowners, because those people are in the rented sector already.
“Making rental property more expensive, as is very likely if you reduce the attractiveness to suppliers of rented property, if a side effect of that is to make rents even higher, it is very hard to see that as helping the people who you are trying to help become homeowners.”