Following George Osborne’s swinging tax reforms, which will undoubtedly have a big impact on buy-to-let landlords; a senior Conservative Peer has reacted with accusations that the former Chancellor has exacerbated the housing crisis through his “cash grab” on landlords.
Lord Flight, who previously served as Shadow Chief Secretary to the Treasury, has used an article for the website of the Residential Landlords Association (RLA) to warn that decisions to tax landlords on their income instead of their profit, and imposing a new stamp duty levy on the purchase of homes to rent, will “drive up rents” and “drive out investment in the sector” at a time when 1.8 million new homes to rent are needed by 2025.
In his article, Lord Flight points to evidence from the London School of Economics that undermines the previous Government’s assertions that landlords are buying homes that first time buyers could have purchased. He also highlights assertions by the Institute for Fiscal Studies that landlords are taxed more heavily than homeowners.
Lord Flight calls on landlords to lobby their local MPs to tell them about the damaging impact the tax changes will have on the supply of affordable homes to rent and encourage them to seek changes in the new Chancellor’s Autumn Statement on 23rd November.
Commenting on the article, RLA Chairman, Alan Ward, said:
“Lord Flight’s analysis is correct. When we need almost two million more homes to rent by 2025, recent tax changes will choke off investment, increase rents and make it more difficult for tenants to save for a home of their own.
“The new Chancellor has an important opportunity next month to correct the previous Government’s changes to the way the rented sector is taxed. We call on him to seize this opportunity with both hands.”
The RLA represents 40,000 private sector residential landlords in England and Wales.
- Earlier this month the Royal Institution of Chartered Surveyors said that 1.8 million new homes to rent will be needed by 2025. Further details can be found here
- On 8th March 2016, Paul Johnson, Director of the Institute for Fiscal Studies told the House of Lords Economic Affairs Committee: “If you buy to let, you pay income tax on the return and capital gains on what comes out when you sell it at the end, which is not the case for owner-occupiers. The current system is clearly more tax favourable towards buyers and owner-occupiers than it is towards buy-to-let landlords and renters. The tax system is not, and was not, even before the recent changes, more generous to people buying to let.” The transcript can be found here
- Earlier this year the London School of Economics published a paper analysing the Government’s recent tax changes to landlords. It can be found here Page 5 notes: “The (very limited) research into direct competition between investors and putative owner-occupiers has found that nationwide only a minority of sales to landlords involved bids from both types of buyer.”
- Earlier this year the Council of Mortgage Lenders published key data on the buy-to-let mortgage market, available here It noted: “The leveraging profile of buy-to-let borrowers looks particularly conservative when viewed alongside first-time buyers, who on average borrow 78% of the property value, versus 70% of the property value for buy-to-let borrowers.”
Lord Flight Condemns Buy-to-Let Tax https://t.co/73VVlb8GpH
— LandlordZONE (@LandlordZONE) October 25, 2016