“No pain, no gain”. That was the mantra that the former Chancellor adopted in imposing major tax hikes on individual landlords, central to which was the well documented reductions in mortgage interest relief.
It reflected a misguided belief on the part of the Treasury under George Osborne that private sector landlords were to blame for the unaffordability of house prices for new buyers instead of being part of the solution. He argued that private sector landlords enjoyed tax advantages over home owners and so out-competed first time buyers for properties for sale. Yet the respected Institute for Fiscal Studies has made clear that landlords never had and do not currently enjoy a more favourable tax regime than home owners.
George Osborne argued that his changes were about preventing landlords buying properties that could have gone to first time buyers. Yet the London School of Economics earlier this year declared that “only a minority” of house sales to landlords involve bids from both them and first time home buyers.
The former Chancellor also argued that his measures were about preventing a buy-to-let bubble damaging the economy, yet data published by the Council of Mortgage Lenders has noted that: “the leveraging profile of buy-to-let borrowers looks particularly conservative when viewed against first-time buyers.”
It reported that on average, a homeowner borrowed 78% of the value of a property, compared with 70% for buy-to-let borrowers. Osborne also added further increases in Stamp Duty buying costs, so worsening the ‘drying up’ of the housing market in London and making it more difficult for first time buyers.
In short, the previous Chancellor’s assault on landlords exacerbated the housing crisis. By going on a cash grab against landlords his policies are serving to drive up rents; drive out investment in the sector at a time when the RICS suggests we need 1.8 million new homes to rent by 2025; and to push more tenants into the arms of the minority of unscrupulous landlords. The majority of landlords, providing good and decent accommodation, have concluded that it is simply not worth their while adding to their properties.
With the new Housing Minister rightly shifting the focus of Government policy away from a single minded path of homeownership towards boosting the supply of housing across all tenures, the Autumn Statement next month provides the opportunity to change these punitive taxes; including a reduction in Stamp Duty costs applying to higher cost properties in London and the South East, which are more expensive.
From experience, I know how conscientiously the RLA has represented the interests of its members and worked sensibly with Government and Parliamentarians to seek changes that support, rather than attack, a vibrant private rented sector.
But the RLA cannot do it on its own. RLA members themselves have a vital role to play as part of the campaign to seek changes.
As a former Member of Parliament I can tell you that few things focuses the mind of an MP more than receiving representations from constituents, especially if many are saying the same thing about how their constituents will suffer because of government policy.
Equally, nothing focuses the mind of a Minister more than lots of MPs, particularly from their own Party, telling them the Government has made, as with this, a big mistake and that changes are needed.
So, please email or write to your MP or, preferably, meet with them at one of their regular surgeries. Tell them about the impact of the tax changes – will you have to increase rents on tenants? Will you stop investing in existing or potential future new properties? What is demand like for rental accommodation in your area?
Remember, MPs want to know what impact the property tax hikes will have on their constituents in terms of making it more difficult for them to find suitable housing at an affordable rent.
We need landlords like you, to get their MP to tell Ministers why changes are needed in the new Chancellor’s forthcoming Autumn Statement.