Proposals drawn up by Conservative think tank Onward to allow existing buy-to-let properties to be eligible for 100% capital gains tax relief if the property is sold to a tenant who has lived there for three years or more has been cautiously welcomed by the Residential Landlords Association (RLA), but it is concerned that landlords are being encouraged to ‘disinvest from the sector’.
David Smith, policy director for the RLA, is pleased that Onward has acknowledged the need for “more positive taxation in the rented sector”, but expressed his reservations.
He said: “Last year, we suggested using capital gains tax reliefs in a similar way to that being proposed today.
“Since then, a report by academics at Cambridge University for the RLA has argued that it is not clear whether a reduction in the rates at which capital gains tax is applied would incentivise landlords to sell their properties to sitting tenants.
“A more suitable approach would be a tax relief on rental income for the provision of longer tenancies, with a refund on the stamp duty levy for additional properties where a landlord is prepared to sell a property to a sitting tenant.”
Smith continued: “Where Onward is wrong is in its call for landlords to disinvest from the sector. With the demand for private rented homes showing no signs of abating, and the Institute for Fiscal Studies [IFS] today warning of the difficulties many young people have affording a home of their own, to choke off the supply of rental homes would leave many young people stranded and continuing to rely on the home of mum and dad for a place to live.”
The RLA wants to see the Chancellor use his Budget statement later this month to scrap the stamp duty levy on additional properties where landlords are prepared to invest in property, adding to the net supply of homes.
He added: “This could include bringing empty homes back into use, new-build properties or converting larger properties into smaller, more affordable units.
“To tax new housing supply, given the current housing crisis we face, is simply ludicrous.”