Campaigns Finance and Taxation Reform

Bitesize Budget – tax incentives for longer tenancies

bitesize-budget
Sally Walmsley
Written by Sally Walmsley

Last month we outlined our key asks of the government in our budget submission, ahead of November 22nd.

Here we break down the document to run through what we believe the government could do to support you, the residential landlords out there offering vital homes to let at a time of housing crisis.

In this first article, we outline our call for tax incentives for landlords offering longer tenancies, a new housing court and reform of Section 8 to create more security for landlords and tenants alike.

Keen to win renters’ votes the government has backed calls for longer, ‘family friendly’ tenancies, offering greater security to tenants.

However, along with a longer tenancy comes a greater risk for landlords, who are potentially being left to shoulder the cost if a tenant stops paying rent, due to the prolonged processes needed to regain possession in the fixed term.

The risks to the landlord have been exacerbated by recent changes to mortgage interest relief and in its submission to the government ahead of this month’s budget, the RLA is asking for new tax incentives to encourage landlords to offer these tenancies.

In a recent survey by the RLA of almost 3,000 landlords, 63% reported that they would offer a tenancy of 12 months or longer at the request of the tenant – so the will is there.

And in his speech to the Conservative Party Conference, Communities Secretary Sajid Javid confirmed the government will be offering some form of incentive to landlords.

He said: “All landlords should be offering tenancies of at least 12 months for those who want them…. That’s why, at the Autumn Budget, we will bring forward new incentives for landlords who are doing the right thing.”

The RLA believes the change could be policed by linking it to the issuing and signing of an agreed tenancy agreement that sets the tenancy at two years or more, with a six month probation, without the ability to terminate the tenancy inside that period, other than for tenant default.

It is also asking the government to work with mortgage lenders to address barriers to longer tenancies – including mortgage conditions – after RLA research found nearly one in four landlords identified that they had mortgage conditions that restricted the maximum tenancy length.

New housing court

In order to offer these family-friendly tenancies landlords have to be confident they can regain possession of their property if arrears build up, or a tenant behaves badly, which is why the RLA is also calling for a housing court to speed up the potentially lengthy process

The RLA first called for a new housing court in its manifesto ahead of the 2017 general election, with Sajid Javid also announcing plans to consult on creating such a court in his speech to the Conservative Party Conference.

In the wake of the announcement, the RLA has submitted a briefing note on the RLA’s proposal to the Department for Communities and Local Government (DCLG) and the Ministry of Justice (MoJ).

It currently takes an average of 43 weeks for a landlord to regain possession if a tenant falls into arrears, which the RLA believes is unacceptable.

It has welcomed the proposal by the government to create a new court and believes the best way forward would be to build on the work of the existing First Tier Tribunal (Property Chamber) – adding extra areas of jurisdiction to its remit.

These would include:

  • All residential possession matters
  • Tenancy deposit disputes
  • Repair obligations
  • Matters related to and contained within the Defective Premises Act 1972;
  • Relevant matters contained within the Environmental Protection Act 1990; and
  • Service charge disputes as they relate to leasehold properties.

It also wants orders made by the Tribunal to be made directly enforceable, meaning they would no longer have to be converted into county court orders.

The proposals include plans to move county court bailiffs into the private sector.

Section 8 reform

Related to the creation of the new housing court are proposals to reform of the Section 8 process.

Section 8 allows a landlord to seek possession on the basis of one of 17 specifically listed grounds. This includes where a tenant has built up more than two months’ worth of rent arrears or has committed anti-social behaviour.

However, many landlords are reluctant to seek a section 8 notice from the courts because it requires a court hearing, often does not guarantee possession and takes so long.

The RLA now wants the government to undertake a full review of the grounds under which a Section 8 notice can be sought, with the aim of speeding up and simplifying the process by which landlords can regain possession.

To read the full budget submission click here.

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Communications Manager for the RLA and award-winning Editor of RPI magazine. With 16 years’ experience writing for regional and national newspapers and magazines she is responsible for producing articles for our Campaigns and News Centre, the weekly E-News newsletter and editorial content for our media partners.

She issues press releases promoting the work of the RLA and its policies and campaigns to the regional and national media and works alongside the marketing team on the association’s social media channels to build support for the RLA and its work.

2 Comments

  • I’ve had tenants for over 20 years in one property that is already paid for so tax relief on a mortgage is useless to me. It would be better to offer a Capital Tax relief for the years they were let or time held as it was in the past.

    When my tenants are long term and pay rent on time I only increase the rent a tiny bit every three years. We all benefit, I keep my tenants , they are secure.

    Most landlords want long term tenants as long as they pay the rent.

  • The irony being that the major obstacle to many leveraged landlords offering 2 year tenancies is the potential for an unexpected large jump in interest rates which could leave a tax liability under Section 24 – despite the property being loss making.

    I have had tenants in place for donkey’s years from ASTs which have run on to rolling monthly contracts. I would have happily granted longer contracts prior to Section 24 had I ever been asked, I would do in the future if S24 were to be repealed but with it in place the flexibility to offload a property with vacant possession should it become a drag on the rest of my portfolio will outweigh any half hearted sops thrown by the Chancellor in his budget.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.