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Government attacked for ‘incoherent’ approach to PRS

The government has been attacked by a former member of the Bank of England’s Monetary Policy Committee for its “incoherent” approach to the private rented sector. 

David Miles, now a professor of financial economics at Imperial College London, argues that there are “few signs” that tax increases on the sector have benefited those hoping to become homeowners. 

Instead, he believes that the tax hikes have led to “reduced choice” in rental stock, thus placing upward pressure on rental values “as supply gradually shrinks”. 

In recent years, the government has introduced measures to restrict mortgage interest relief on the PRS to the basic rate of income tax, imposed a stamp duty levy on the purchase of new homes to rent out, and scrapped the ‘wear and tear’ allowance for furnished properties, with a view to helping first-time buyers gain a foot on the housing ladder. 

But the government’s strategy of clamping down on buy-to-let investment has led to “squeezing the supply of rental property and driving rents up”, which does not help first-time buyers. 

He said: “[There is nothing] intrinsically wrong with people being in the rented sector for an extended phase of their life. We should want to avoid a situation where people feel pressurised into taking big mortgages relative to their income early in life because the rental option is so poor.”

He added: “In a world where house prices might be consistently higher relative to incomes than in the past we might naturally expect the period in which people are in the rented sector is longer. 

“And there are good economic reasons for believing that in a country with a rising population and where real incomes tend to increase over time house prices might well rise at least as fast as incomes. To have then introduced measures that reduce the supply of rented property is perverse.”

David Smith, policy director for the Residential Landlords Association, agrees with Miles, insisting that he “hits the nail on the head” with his views. 

Smith commented: Choking off the supply of rental properties does nothing to help aspiring home first-time buyers who need somewhere to live now.

“It is time to change tack and recognise that we need more homes to rent as well as to buy in order to meet growing demand and have policies that support investment.”

Poll: Do you agree that the government’s strategy of clamping down on buy-to-let investment has led to a reduction in the supply of rental property, placing upward pressure in rents?

PLACE YOUR VOTE BELOW

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    It really isn't rocket science, look at any product where it happens.
    Osborne did this for extra tax, period.
    Others have jumped on the bandwagon and now burdened the sector with huge cost of legislation. Only a fool couldn't see this, but politics is popularity not necessarily worried about consequences

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    Place increased costs on ANY business and it will always be the end user that pays the price

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    As above, it was a tax grab whilst trying to appease FTB which has miserably failed.

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    As I have said before many times it was caused by George Osborne tax hikes, stamp Duty in general plus 3% surcharge on buy to let when announced in his Autumn Statement in 2015 but not being introduced until 2016, so there was a big rush on to buy or sell before the changes, it was also a great time for getting rid of rubbish Properties. However, it was introduced from memory in April 2016 then comes Referendum on 23rd June 2016 just 2 months after so anyone with property whether portfolio, couple of properties, their family members or anyone connected to property which are millions voted against the Government as a protest vote and not a vote to come out of EU.
    Subsequently the Government got the shock of their lives when the vote went against them, although it was marginal only 2% difference another 2% it would be 50% each. This forced Premier Cameron who was doing a good job by comparison to what happened since, to resign who was in favor of staying-in as I think Mrs May was as Boris was but turned his coat 2 days prior so he can't be trusted. Anyhow I am amazed no one has picked up on this with all the uproar going on, so certainly George Osborne caused Brexit. How can any one person be allowed to bring this Country to its knees, just born into the riches of Wall Paper Family in Cheshire so what does he know about life and only born in 1971, he has been and gone leaving a disastrous legacy for us all. Why is any of this not ever mentioned then went touring the Globe getting paid hundreds of thousands £'s for telling them the dirty trick he had done on Property owners.

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