The Chancellor must take action in the Budget to reverse the fall off in the supply of rented housing say landlords.
With landlords selling more properties than they are buying and others switching to short-term holiday lets for tax reasons, unless action is taken tenants are going to find it increasingly hard to find the housing they want, and rents will inevitably go up.
The 3% stamp duty levy on extra housing introduced in 2016, among other measures, has slowed investment in new rented property.
This drain in rental accommodation is being exacerbated by landlords being incentivised by the tax system to switch their properties to short-term lets.
By doing so they can still claim mortgage interest relief which from April will be completely restricted to the basic rate of income tax for those renting out property long term.
As a result, ARLA Propertymark has warned that almost half a million properties could be left unavailable for tenants in need of long term homes to rent.
In a joint submission ahead of the Budget, the Residential Landlords Association and The National Landlords Association argue the tax system is acting to completely contradict the government’s housing objectives.
- rent rises as a result of the demand for rental properties exceeding supply will make it harder for tenants to save for a home of their own.
- the government wants to encourage longer term tenancies, yet more landlords are moving into the short-term letting market.
- the government wants more housing yet imposes a tax on the development of new properties.
The RLA and the NLA are calling for a fundamental review of the way rented housing is taxed to ensure that tax policy supports, rather than contradicts, policy objectives.
- the stamp duty levy is dropped where landlords add to the net supply of housing through developing new properties, bringing empty homes back into use, changing use from commercial to residential or converting large properties into smaller, more affordable units of accommodation.
- tenants are supported into homeownership by introducing a Capital Gains Tax emption where landlords sell a property to a sitting tenant and that tax relief is available where landlords invest in measures to improve the energy efficiency of a rented property.
David Smith, policy director for the RLA, said: “The tax system for rented housing is failing. It encourages the provision of holiday homes over long term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.
“For the sake of those living in rented housing or who are looking for accommodation, Ministers need to use the Budget to urgently change course and work with good landlords to ensure the provision of good, long term, affordable housing.”
To read the joint RLA/NLA Budget submission in full click here.