Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.

According to the Residential Landlords Association (RLA) landlords are likely to raise their rents in the coming months after the tax changes introduced by the Chancellor in his recent budgets.

The RLA thinks “almost all landlords” are considering increasing rents to pay for the higher taxes they now face.

The follows a survey by the RLA, where 84% of private sector landlords said they are likely to increase rents due to the Chancellor’s recent tax assault on the buy-to-let (BTL) sector.

78% of landlords said tax the changes would deter them from investing in more properties to rent, with half of those questioned considering getting rid of properties. The news comes as demand is still rising for rented housing. Savills, the property consultants, are predicting that one million new homes to rent will be needed by 2021.

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In a statement, the RLA have said that while fewer buy-to-lets being bought might meet the Chancellor’s aims, to free-up some properties for homeowners and first-time buyers, this does not add up.

For an increasing number of people who cannot afford to buy, or who prefer not to, the tax changes will make it even more challenging and more expensive for them to access housing.

The RLA suggests that in forcing rents up the Government policy is, in fact, hitting those it wants to help into homeownership through making it more difficult for them to save for the deposit they need.

The RLA is, therefore, calling on the Government to exempt from the 3% stamp duty levy all rental property making a net increase in the supply of new housing. 39% of landlords reported that they would be more likely to invest in new build rental housing if this was exempt from the levy.

RLA Chairman, Alan Ward commented:
“The Chancellor’s tax policies are impacting on tenants’ lives – not only are more than four in five facing rent increases but half of all landlords may be selling rented property, which might result in tenants being given notice to leave their properties.

“Ministers need to end the myth that landlords are to blame for the country’s housing crisis and base policy on fact, not political expediency”. he said.

From the 1st April, a 3 percentage point levy is charged on properties bought to rent out. The Chancellor has also previously announced that mortgage interest relief will be restricted to the basic rate of income tax and the announcement in the Budget last month of a Capital Gains Tax cut will not apply to residential property.

The independent Institute for Fiscal Studies has noted that rental housing is taxed more heavily than homeowners and there is little evidence to suggest that homeowners and landlords are in competition for the same properties. In the oral testimony provided recently to the House of Lords Economic Affairs Committee inquiry on the housing market, the Director of the IFS, Paul Johnson noted:

“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

In a recent article for City AM, Michael Ball, professor of urban and property economics at Henley Business School at the University of Reading asked if recent tax changes to the buy-to-let sector will increase the number of homes available for first-time buyers. He concluded:

“This is less likely than has been suggested as many rental properties, such as houses in multiple occupation, are often unappealing to this group, as are the areas where renting is concentrated. The main competitors faced by first-time buyers are existing home owners, whose tax breaks and high own-equity make them strong players in the market-place.” The article can be read here

Savills research has suggested that 1 million new rental properties will be needed by 2021. Details can be found here

In its report on the Autumn Statement/Spending Review 2015 the cross-party Treasury Select Committee warned:

“Were the measures taken to curb buy-to-let to have a substantial effect, they would come at a cost to the wider economy. Access to a well-functioning, affordable housing market, including for private rented properties, has been widely recognised to be crucial to labour mobility, and hence the overall efficiency of the job market.” This report is available here

Rents are likely to rise following landlord tax increases.

According to the Residential Landlords Association (RLA) landlords are likely to raise their rents in the coming months after the tax changes introduced by the Chancellor in his recent budgets.

The RLA thinks “almost all landlords” are considering increasing rents to pay for the higher taxes they now face.

This follows a survey by the RLA, where 84% of private sector landlords said they are likely to increase rents due to the Chancellor’s recent tax assault on the buy-to-let (BTL) sector.

78% of landlords said tax the changes would deter them from investing in more properties to rent, with half of those questioned considering getting rid of properties. The news comes as demand is still rising for rented housing. Savills the property consultants are predicting that one million new homes to rent will be needed by 2021.

In a statement the RLA have said that whilst fewer buy-to-lets being bought might meet the Chancellor’s aims to free-up some properties for home owners and first time buyers, for the increasing number of people who cannot afford to buy, or who prefer not to, the tax changes will make it even more difficult and more expensive for them to access housing.

The RLA suggests that in forcing rents up the Government policy is in fact hitting those it wants to help into homeownership through making it more difficult for them to save for the deposit they need.

The RLA is therefore calling on the Government to exempt from the 3% stamp duty levy all rental property making a net increase in the supply of new housing. 39% of landlords reported that they would be more likely to invest in new build rental housing if this was exempt from the levy.

RLA Chairman, Alan Ward commented:
“The Chancellor’s tax policies are impacting on tenants’ lives – not only are more than four in five facing rent increases but half of landlords may be selling rented property, which might result in tenants being given notice to leave their properties.

“Ministers need to end the myth that landlords are to blame for the country’s housing crisis and base policy on fact, not political expediency.”

From the 1st April, a 3 percentage point levy is charged on properties bought to rent out. The Chancellor has also previously announced that mortgage interest relief will be restricted to the basic rate of income tax and the announcement in the Budget last month of a Capital Gains Tax cut will not apply to residential property.
The independent Institute for Fiscal Studies has noted that rental housing is taxed more heavily than home owners and there is little evidence to suggest that home owners and landlords are in competition for the same properties. In the oral evidence provided recently to the House of Lords Economic Affairs Committee inquiry on the housing market, the Director of the IFS, Paul Johnson noted:

“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

In a recent article for City AM, Michael Ball, professor of urban and property economics at Henley Business School at the University of Reading asked if recent tax changes to the buy-to-let sector will increase the number of homes available for first time buyers. He concluded:

“This is less likely than has been suggested as many rental properties, such as houses in multiple occupation, are often unappealing to this group, as are the areas where renting is concentrated. The main competitors faced by first-time buyers are existing home owners, whose tax breaks and high own-equity make them strong players in the market-place.” The article can be read here

Savills research has suggested that 1 million new rental properties will be needed by 2021. Details can be found here

In its report on the Autumn Statement/Spending Review 2015 the cross-party Treasury Select Committee warned:
“Were the measures taken to curb buy-to-let to have a substantial effect, they would come at a cost to the wider economy. Access to a well-functioning, affordable housing market, including for private rented properties, has been widely recognised to be crucial to labour mobility, and hence the overall efficiency of the labour market.” This report is available here

Please Note: This Article is 3 years old. This increases the likelihood that some or all of it's content is now outdated.
©LandlordZONE® – legal content applies primarily to England and is not a definitive statement of the law, always seek professional advice.

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