With the summer Finance Bill receiving Royal Assent last week, RLA Policy Manager, John Stewart (pictured), speculates on what tomorrow’s Spending Review and Autumn Statement will hold for landlords.
“Given the Chancellor’s summer tax grab, in the shape of ‘reforms’ to relief on finance charges, landlords could be forgiven for approaching tomorrow’s Autumn Statement with some trepidation.
“Not only has the Government borrowed more than anticipated, the House of Lords have blocked £4.5 billion of potential savings from Tax Credits, leaving a gaping hole in George Osborne’s plans for a £10 billion surplus before the 2020 election. Speculation is turning to where he might turn to plug that gap.
“He may, of course, choose to take the hit, or phase the Tax Credit changes, but that would mean an early and embarrassing policy change. As we have seen with interest relief, the Chancellor seeks to emulate the Iron Lady on u-turns.
“It is no secret that the Government believes housing benefit levels are too high and would be an obvious target. There are options available, none of which spell good news for those landlords who provide vital homes to those on benefits,or tenants.
“He could seek to go further than the recently approved freeze and reduce the percentile of market rents at which the Local Housing Allowance is set, perhaps to the 25th percentile. This would go a long way to replacing the missing billions.
“Alternatively, there is speculation that benefit claimants could be required to meet a set proportion of their rent. 10% has been mooted. This would fit well with the Government’s ‘personal responsibility’ agenda, that sees the housing element of Universal Credit paid direct to the tenant, rather than to the landlord. We have already seen tenants struggle to make up rent shortfalls created by the ‘bedroom tax’, and miss rent payments when paid direct. Landlords could expect arrears to soar.
“Neither measure will encourage landlords to rent to benefit claimants, and may see some already in this market exit, piling even more pressure on local authority homeless services and forcing more tenants into substandard properties let by the very criminals the Housing Minister wants to drive out.
“Or maybe the payment of housing benefit will be linked to property standards. Many argue that it is not right that a landlord should receive money from the state, through rent paid via housing benefit, for a property that is unfit. Again, any such measure would leave local authorities struggling, both to inspect properties ahead of payment and with homelessness resulting from tenants removed from substandard homes.
“Finally, could there be more tinkering with interest relief available to landlords? The Summer Budget left an anomaly, whereby unincorporated landlords will see tax relief on finance charges limited to the basic rate while limited companies can still offset these charges. Might the Chancellor move to level this playing field at just the time many landlords are exploring their options and weighing up the pros and cons of incorporation?
We’ll find out tomorrow how the Chancellor will fill a hole that many believe he has dug for himself.