Tax Landlords:

Private landlords are putting home ownership beyond the reach of at least 2 million families, that’s the conclusion of a radical new report from a new Conservative think tank “Onward”.

The Conservatives are concerned about the “unbalanced” nature of the housing market and how it may affect future voting patterns. With now approximately one-fifth of voters – predominantly young voters – living in rented accommodation, and likely to vote for an alternative government, the Conservatives see an urgent need for rebalancing!

The report published by the Onward group recommends ending, or severely curtailing, all tax breaks for buy-to-let and private landlords.

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They want a stronger housing role for local councils and a major reform of the local planning system to put communities rather than developers in the driving seat.

More than 2m families are now denied home ownership as landlords as landlords have unbalanced the housing market away from first-time buyers, that’s the conclusion of this Conservative think-tank.

These are quite radical proposals, set-out in a pamphlet published on Monday by the Onward group, and come from the Onward think tank set-up earlier this year. The report is written by Neil O’Brien, a former aide to George Osborne. He also worked for Theresa May at No 10, and now calls for radical government intervention in the housing market, including giving London councils the power to limit foreign ownership.

Mr O’Brien says:

“We need to change the balance between the rented sector and home ownership, We should protect existing landlords but discourage more people from investing in rental property, because the buy-to-let boom has bid up prices and reduced homeownership among younger people.”

Tax Relief Cuts

Even though some previous governments have brought in swinging tax relief cuts on such things as mortgage repayments and maintenance allowances for landlords, this report says that buy to let is still a privileged form of investment. It is reducing the number of homes available for owner-occupiers, and at the same time, reducing the amount of capital available for more productive investment, says the report.

The think-tank makes several recommendations as to how to increase the supply of new homes. But the Conservatives find themselves on the horns of a dilemma: any call for a crackdown on residential investors is likely to cause controversy among the politicians, with many Conservative MPs loathe to target the PRS given that many wealthy landlords vote for the party, and indeed many MPs are landlords themselves.

The Onward group is just one of several Conservative think-tanks floating ideas to which would mean the party can reconnect with younger voters, many of whom would otherwise be attracted to the housing policies and promises of a new Labour government.

Their problem is that many of these policies, both Conservative and Labour, fly in the face of economic reality: in a post-recession era of ultra-low interest rates, asset prices have gone through the roof across the Western World. Not just Britain but the USA, Canada, Australia, the Anglosphere in general, has experienced the same phenomenon. House price inflation is excluding the young from home ownership, but it favours older people with money to invest. The banks and building societies offer a pittance in interest, so hence the search for higher returns in property.

So, landlords have benefited from record-low interest rates for over a decade, as cheaper borrowing costs have lowered monthly mortgage payments while pushing up property prices.

But despite the 3% surcharge on stamp duty for buy-to-let landlords, as well as the phasing out of mortgage interest tax relief for higher earners, to the basic rate of tax, the Onward report is calling for much tougher action. This includes the complete removal of mortgage interest relief, regardless of income.

According to the report, in the 1960s and 70s, UK private renters paid on average around 10% of their income on rent, but today that figure is closer to 30%, and even higher at 40% in London. The report’s author, Mr O’Brien, who is now the Conservative MP for Harborough, says:

“We can’t solve the housing problem with one hand tied behind our backs.

“As well as building more homes, we need to change the balance between the rented sector and home ownership. The buy-to-let boom has bid up prices and reduced home ownership among younger people.”

Mr O’Brien is suggesting that local councils need powers to limit foreign buyers from purchasing new homes, and is urging the government to set a long-term target to make housing more affordable.

Onward would have councils given the power to borrow money to invest in development land, allowing local communities, rather than developers, to reap the benefit from the uplift in value due to planning permission grants.

Will Tanner, who is another former Downing Street policy adviser, and director of Onward, says it is possible to tackle the housing crisis without concreting over the green belt:

“If the government wants to regain the support of young people … it must be unflinching in its pursuit of greater home ownership. That means hard choices like ending tax breaks for new landlords and giving councils much stronger powers.”

©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.

6 COMMENTS

  1. If interest rates were normalised that would redress the balance in an instant – people would be piling out of the BTL market and back into bonds and other investments that don’t involve endless repairs and looking after tenants.

  2. Well, what’s the point in voting for the Conservatives anymore when you can cut out the middleman and vote for the actual Labour Party?

    When will these people use some original thought!? Property in Britain has NOT become unaffordable. Property in South East England has become unaffordable – because that’s where most of the infrastructure and jobs investment is and also where most immigrants choose to live – because that’s where all the infrastructure and…etc etc.

    Admittedly, of course the other reason is indeed Mickey Mouse interest rates – just listen to those bloody annoying ads on the radio. I even heard them advertising Maseratis at ‘Nought Per Cent APR Representative’!

    Property prices in many parts of the North are actually LESS today than they were 10 years ago. So instead of yet again attacking everyone’s favourite bête noir, The Private Landlord, the government should invest properly in infrastructure in the North West and North East of Britain and offer financial incentives to companies to relocate there.

    Instead the idiots approve mad schemes like expanding Heathrow which will just cause even more demand for housing in West London and the Home Counties. Then they say ‘We must build more homes, we must build more homes’.

    • btl require 25% deposit as minimum and interest rate is much higher than residential landlord. Non Paying tenant are the main problem for private landlord and evictions for non payment takes 6-12 months. no wonder a lots of private landlord are selling ,soon there will be shortage of private accommodation. i am unable to understand my option for £10,000.00 debt my ex tenant left without paying. how can i get my rent be given as debt collection. are there any agencies which is good at collection of rent arrears, as i suffered from rent dodging expert single mother lady.can anyone suggest any good option for landlord to collect rent from ex-tenant… these days everything is against landlords..

  3. And the understandable presumption is that a landlord’s assets (property) are increasing in value. Where I live that is not the case. Properties in my area have lost value over the last 10 years to the tune of 10% or 12%.

  4. It beggars belief that increasing the costs to landlords will some how benefit tenants. If my costs go up then I put rents up. If I cant put rents up to cover expenses, I sell. If we all sell and non landlords are buying, where do we house future tenants, especially in the social housing sector. Its a simple tax grab against a soft target they feel will not loose them so many votes. They may even gain votes by pretending they are helping out the people trapped in the rental market. No one can sustain a business running at a loss. No one wants the problems associated with being a land lord when the profit is so small, a simple boiler failure can wipe out half a years income. They seem to live in a London bubble where landlords bought in the 90s and make huge profits today charging thousands in rent. They seem to forget the other areas where a one bed flat pulls in £500 a month or less. Blaming house price increase on the BTL industry is nonsensical. 0.5% interest rates, mortgage companies offering high multiples, mad as hell terms and the cost of commuting is to blame and that wont change by forcing rents up.

  5. I rent one little property in sunny Blackpool/North West (because I couldn’t sell it). All the tenants I’ve had so far have actively chosen to rent. One ‘a young couple’ were keen to pursue their careers and expected to move about the country. Another was ‘older’ and sick of paying out for repairs on their own property and wanted someone else to take the strain. My current ‘family’ were brought up renting and have no interest in buying – they would rather enjoy their money now.

    How do I know? – I asked them – and all were quite open in their responses. Perhaps, people’s attitudes to ‘owning their own home’ have shifted. Who did the ‘think tank’ ask?

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