Recent tax hikes on landlords have been good for the housing market by persuading more BTL investors to sell up and this has helped over a million first time buyers onto the property ladder, it has been claimed.

The research by the Joseph Rowntree Foundation published today will be well received by Government ministers, who yesterday called on mortgage lenders including the Nationwide, Santander and the UK’s building societies to make first time buyers their ‘top priority’.

For many years key party figures within Labour have said that a smaller private rented sector would see a rise in the number of properties for tenants to buy, while landlords and letting agents have claimed fewer homes on the market will see rents continue to rise.

Darren Baxter (pictured) the foundation's principal policy officer, says: “The previous government rightly recognised that the tax system had swung too far in favour of landlords over and above people looking to buy their first home.

“Tax reforms introduced to address this imbalance have allowed more first-time buyers, including young people, to own their own home. This has been achieved without the dire consequences for renters predicted by those opposed to taxes on landlords.”

The tax squeeze on the private rented sector has been proceeding at pace including - in England since last October - an increase in stamp duty for those buying buy-to-let properties and second homes from 3% to 5%.

Tax relief

Before that – since 2017 - landlords had already seen their tax relief on mortgage interest gradually reduced.

HM Treasury also recently leaked proposals to charge self-employed landlords National Insurance on their rental income, and extra taxes for landlords are expected in Rachel Reeve’s next Budget announcement in one form or another.

Not correct

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “The idea that higher taxes are good for renters is simply not correct.

“Both the former head of the Institute for Fiscal Studies and the current Housing Minister agree that tax policy affects rent levels. It is not clear how higher taxes, leading to higher rents, makes it easier for tenants to save for a home of their own.

“Despite some modest improvements in supply, there are still an average of 11 renters chasing every home to rent according to Rightmove.

“Further tax hikes will serve only to dampen investment in the sector, undermine tenant choice and push rents even higher.

“For millions of people, the private rented sector is vital for ensuring they have a place to call home. Rather than more piecemeal tax grabs, the Government should use the tax system more strategically.

“We need tax policies that encourage long-term investment

“We need tax policies that encourage long-term investment in new decent quality rental housing, supports investment in energy efficiency improvements, and incentivises responsible private landlords to bring long-term empty homes back into use.

“That’s how we expand supply, drive up standards, and ease pressure on renters.”