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TODAY'S OTHER NEWS

‘Assault’ on landlords ‘contradicts the basic principles of sound tax policy’

Buy-to-let landlords are being unfairly penalised for the housing crisis, according to a new report by the Institute of Economic Affairs (IEA).

In its latest publication, the think tank said the government’s recent tax changes for buy-to-let property owners defied “any basic economic analysis”.

The report, seen exclusively by Telegraph Money, has called for a major overhaul of the way properties, particularly homes in the PRS, are taxed, especially as it believes that landlords are being “discriminated against” compared with owner-occupiers.

The IEA pointed out that in some instances, landlords will face an effective tax rate of more than 100% after 2021, when tough new rules fully take effect.

The authors of the report, Rosalind Beck and Philip Booth, two academics specialising in the property market, warn that the changes are likely to result in higher rents for tenants and a fall in the supply of rental housing as landlords exit the sector altogether.

The report warns that decent landlords are likely to be replaced by less reputable investors as a result of the tax changes.

Booth commented: “Recent tax changes to private rented housing will raise rents and reduce the supply of houses for rent.

“The government, under policies set in train by Mr [George] Osborne, is subjecting private landlords to a sustained assault by increasing stamp duty and not allowing finance costs to be fully deducted for tax purposes.

“This policy contradicts the basic principles of sound tax policy and the Treasury’s justifications are disingenuous. The policy may create situations in which over 100% of a landlord’s profit is due in tax.”

The IEA report suggests that the government should reverse the changes to stamp duty and mortgage relief. Such changes have made the tax system “more complex and less economically coherent”, the authors warn.

The think tank said discrimination between types of property should end, this means that homes held in corporate vehicles should not be treated in a more beneficial way than those owned by an individual. Even if it were replaced by another form of property tax, stamp duty should be abolished altogether.

“The Government has changed the tax system in a way which leads to private landlords being taxed more harshly than other forms of business,” the report said.

Poll: Do you agree that the government’s recent tax changes for buy-to-let property owners defies “any basic economic analysis”?

PLACE YOUR VOTE BELOW

  • Chris JaiBahadur

    After recent meetings with a number of my landlords 10% have made a decision to sell their investment properties which they no longer consider as an investment. The final decider for them was the tenant fee ban along with the section 21 being abolished.
    I sincerely hope this government starts a major social housing build programme, Otherwise more empty industrial units will be converted. God forbid.

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    Govt are demonstrably Against the PRS - full stop ! ( All for Votes )
    You could understand if they had Another, or better plan - but sad fact for All tenants looking for accommodation, is they Haven't.
    But hey- ho the Tenants will vote for them, blind to the reality of their rents going UP due to and With, Shortages of accommodation.

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    Correct the frantic chase for generation rent votes has meant all common sense needs thrown out the window .. it’s more what will keep a government in power now is priority

     
    Suzy OShea

    Given the corruption of this government over Brexit and other issues, I don't think Generation Rent will be fooled into voting for the CONservatives any time soon!

     
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    But will generation rent vote tory? very unlikely, mostly i would say vote either greens or labour

     
  • Neil Moores

    I have a very good friend who has about 50 highly geared properties rented out. He built the portfolio by buying and refinancing to create deposits for his next property purchases and intended to keep hold of the portfolio for many years, He employs a maintenance team to keep everything up to and above proper standards. He will pay more in tax than he makes in profit, probably this year and definitely next year. If he sells then the CGT bill is larger than the equity in his property. He says that he is not looking forward to the conversations next year with the tax office when he will be asked why he didn't put some of his income aside to cover his tax bills, and is confident that he will end up speaking to an advisor who wont actually believe that his tax is more than his profit. He will end up bankrupt and homeless in the end, and will struggle to find a property to live in because no-one will want to rent to him with his ruined credit position and their own fears that if he fails to pay then they will face higher costs in chasing the rent than they can recoup due to the fees ban. You couldn't make it up!

  • Paul Barrett

    Well despite LL selling up there is no shortage of rental properties.
    So perhaps there were too many?
    There are no obvious signs of increased homeless.
    The same old hobo's exist.
    So where are all the evicted tenants going?
    Until I see blank spaces in a LA High St windows I won't consider there is any shortage.
    When I sell up I doubt the 14 tenants I will be making homeless will have any problems finding other suitable rental properties.
    So perhaps there are simply too many rental properties for the current demand!?

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    You may be right there Paul.
    With the demise of good returns after the banking crisis, a certain amount of people (mostly retirees) decided to invest their money in property.
    Therefore, there were a lot of properties available to rent.
    Unfortunately, a lot didn't know what they were getting themselves in for and didn't follow correct procedures when selecting tenants and subsequently got caught out.
    Some have sold up and left the sector, but there are probably a lot of properties that still remain.
    Where I am, price dictates everything and if your property is marketed at even a fraction above similar sized properties, ( regardless of condition) then it won't rent out.
    This is probably an indication that there is plenty of choice in the area with regard to properties to rent.

     
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    Not sure this is entirely accurate. If there was abundance of properties in the market, why then do we see so many poorly maintained properties? Surely the tenants wouldn’t rent them preferring to opt for well presented and maintained dwellings

     
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    Agree definitely over supply in our area can wait months for a good tenant for a good quality standard flat .. reducing supply will definitely help us but everything policy wise is driven by what happens in London though

     
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    It looks like different areas have different levels of availability or shortage of properties. In the SNP Socialist Republic of Scotland I recently had 17 groups chasing one flat and the rent is 250% of what is was between 5 and 20 years ago. I believe this is proof that screwing Landlords leads to hiked rents and shortage of rental properties.

     
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    There’s a mass shortage where we are from

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    I have no problem finding good tenants in norfolk.

     
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    I rented out a 2 bed recently, it was in good condition and the rent was at higher side of market, but it took 3 whole days to rent out!!

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    Don’t take the Mick.

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    Darryl
    I can assure you that in my area it is all geared to affordability.
    My properties are in first class order, but will not rent out if there is a cheaper one elsewhere.
    Whilst I concede that tenants are not necessarily going to choose a poorly maintained property, if they have no references etc, this may be their only option.
    I recently had a property on for £25 per month more than it was on previously and it took three months to rent out and I had to drop the rise in rent to do so.
    If there were that much of a shortage, presumably tenants would be queueing up to rent it?
    It is so different in certain parts of the country, so it is difficult to compare.

  • Paul Barrett

    I think perhaps we LL like to believe we own scarce commodities.
    Until there are at least two tenants chasing every rental property I won't believe there is a shortage.
    So no matter how achieved perhaps it is good that rental property is being sold off to reduce what would seem to be too many rental properties.
    This must be good for existing players.
    It seems there are not enough tenants for the available rental stock.
    For rents to increase there needs to be far fewer rental properties available.
    So LL get selling those dud EPC E; F and G properties to dopey FTB.
    Reduced stock will eventually reach a point where overall rents can be jacked up.
    Currently there is too much choice for tenants.
    LL need to get rid of surplus stock across the sector if they wish to achieve rent uplift.
    It is of course difficult to generalise.
    The PRS is the sum of lots of little markets.
    More than ever LL need to identify the strength of these markets and where weak demand exists sell off those properties.

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    So if two chasing defines a shortage, how do you define 17 as I had recently?

     
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    I get an average of 10 calls per on line advert not an issue filling my properties

  • Paul Barrett

    I would say that you two are shrewd old movers in having chosen strong markets where your properties are in demand..
    Not all LL have the same experience as you.
    They are perhaps in weak markets and need to move to stronger ones.
    Easy to say not so easy to do! !

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