The Treasury should focus on easing the housing crisis by thinking more ‘creatively’ and using taxation to ‘encourage and support’ buy-to-let investors to invest in new much needed homes to rent in order help meet growing demand from renters, according to the Residential Landlord Association’s (RLA).
Several reports suggest that a growing number of buy-to-let landlords are likely to exit the private rented sector or reduce the size of their property portfolio over the next 12 months due a range of anti-landlord policies, especially in relation to tax legislation.
The introduction of the 3% stamp duty surcharge, the scrapping of the 10% ‘wear and tear’ tax allowance, and the fact that mortgage tax relief is currently being phased out, have prompted concern that there could be a net reduction of private rented properties this year, as more experienced landlords sell rather than buy.
New research into the impact of recent tax changes in the rental market by the RLA research exchange, PEARL, which surveyed almost 3,300 landlords, found that 69% were deterred from investing in further rental property due to the 3% stamp duty levy on the purchase of additional homes.
The findings also reveal that just 18% of the landlords responding to the survey have acquired at least one property in the last 12 months, down 9% compared to the corresponding period point last year.
With recent figures from the Institute for Fiscal Studies showing that young adults are “significantly less likely to own a home at a given age than those born only five or ten years earlier”, the RLA believe that the results from the study show that young people now face a perfect housing storm, unable to afford a home of their own, whilst investment in new homes to rent stalls.
The RLA is calling also on the government to think more creatively about the use of taxation, including providing capital gains tax relief for landlords prepared to sell a property to a sitting tenant.
This could form the basis of a new model, encouraging landlords to invest in new rental property, to sell it to their tenant after a set period and for the landlord then to repeat the process.
The RLA Policy Director, David Smith, said: “Young people are now facing the full force of the housing crisis. Unable to buy a home of their own and with the supply of homes not increasing to meet rising demand, current tax policy is forcing many young adults to rely on their parents for a place to live.
“It is time for the Treasury to think more creatively and use taxation to encourage and support landlords ready, and prepared to invest in the new homes to rent we desperately need.
“Without change we will still be talking of a housing crisis for years to come.”