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Government urged to support landlords by axing cuts to mortgage interest relief

The importance of the private rented market in this country should not be underestimated – it is a crucial source of accommodation for a number of people, including those unable to afford to buy, and yet many investors are now starting to think twice about investing in the sector, following a raft of controversial changes, including the existing phasing out of mortgage interest relief.

Many landlords with low profit margins could soon end up making a loss as a result of the tax change, which will push some out of the market, and so it comes as no surprise that there are renewed calls for the cuts to mortgage interest relief to be axed ahead of the 2017 budget on 22 November.

The Residential Landlords Association (RLA) wants to see the changes scrapped in order to support those investing in the private rented sector, including the country’s small-scale landlords.

The RLA is also calling for action on the mortgage lenders who prevent landlords from offering longer tenancies that some renters want as well as the introduction of a scheme allowing tenants with good payment histories to have them recognised by credit reference agencies.

The association has put forward a number of proposals, including calls for the government to introduce tax incentives for those landlords willing to sell properties to sitting tenants, those offering longer tenancies and those investing in energy efficiency improvements.

The trade body believes that where a landlord is prepared to sell a property to a sitting tenant the 20% rate of Capital Gains Tax should be applied rather than the existing 28%.

DJS Research findings for the RLA report that 77% of private landlords would consider selling their property to tenants if the tax liability was waived.

The association would also like to see unused and abandoned plots of public sector land redeveloped as new sites for PRS homes.
 
The RLA points out that all projections are that the demand for homes in the private rented sector will continue, with predictions that 25% of all homes will be in the PRS by 2021. But supply is a major problem.
 
The government has encouraged greater institutional investment in the private rented sector but evidence shows that this will never be enough to meet the rising demand.
  
RLA chairman Alan Ward said: “RLA research shows many landlords have stopped investing in more properties as a result of recent tax changes, instead moving into short term holiday lets or ceasing to rent to groups deemed ‘high risk’ such as the young and those on benefits.
 
“These decisions have far-reaching consequences for a country in the grip of a housing crisis and we will do everything in our power to convince the government that this unfair tax must be reversed.”
 

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    • 27 September 2017 08:39 AM

    Reality check. If our tenants could buy and wished to buy then they would not be renting. Second point, section 24 has already started it cancerous destruction of the PRS and we are already spreadsheeting partial liquidation of our portfolio to de leverage. That means kissing tenants good bye. What a monumentally stupid outcome from government policy. I still have to pinch myself that sect twenty four is not even on the general news media radar.

  • G romit

    @Peter David - absolutely spot. The media, MPs and the general public were all taken in by George Osborne's specious arguments for introducing this measure.
    If GO had of been honest (LOL) about the measure and its likely impacts/consequences there would have been riots on the streets.

  • icon

    Yep. Lunatics are in charge of the asylum. They've been warned a thousand times but tefuse to listen. Fools.

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    A lot of people rent because they can’t afford to buy, how do they get the deposits? we also don't have enough properties as we have a housing shortfall... it’s all very well hitting landlords for extra stamp duty, cuts on tax et etc.

    Rents will continue to go up as less landlords are now buying properties, hence less stock hence higher rents it’s a simple supply and demand issue, you could argue rents keep going up to be honest they have stalled since 2015.

    Ask a mortgage adviser when they last set up a buy to let mortgage, most will say 12 months ago if not longer.

    Something needs to happen with the housing sector, and rather than the powers at Westminster sticking their two pence in without getting advice I would ask you speak to the people who work in the industry and have done for years, take on board what they have to say across the country not just in London and then make a plan on what needs to be done.

  • Comprehensive TaxPlanning

    Section 24 is a disgrace. There are ways to mitigate the impact of section 24 - depending on your circumstances. feel free to drop us an email if you're interested: info@comprehensivetaxplanning.com

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