Renters Face Supply Crisis
Chancellor needs to end tax on new homes warn landlords
The Chancellor needs to end a tax on new homes in the Budget or risk a supply crisis in the rental housing market landlords are warning.
The National Residential Landlords Association is calling on the Chancellor to scrap the three per cent stamp duty levy on the purchase of homes to rent where landlords invest in properties that add to the net supply of housing. This would include developing new housing, converting large properties into affordable units, changing the use of a property from commercial to residential or bringing one of the almost 650,000 empty homes in England back into use.
This comes as the Royal Institution of Chartered Surveyors has concluded that rents will rise because of demand for properties increasing, whilst new instructions from landlords continue to “dwindle.”
Property website, Rightmove revealed that outside London asking rents increased in the fourth quarter for 2020 for the first time since 2011, leading to a record average of £972 a month. It warns that in the suburbs, towns and villages, available housing is lower than normal for this time of year, whilst demand is higher.
Ben Beadle, Chief Executive of the National Residential Landlords Association said:
“To have a tax on developing new housing is completely nonsensical at a time when more is needed. Supporting growth in the private rental market, alongside all other housing types, would provide a significant boost to the economy in the midst of the COVID-19 pandemic. Research published last year suggests that landlords inject over £3.5 billion into local businesses across the UK.”
Another change the NRLA wants to see made is to ensure the tax system encourages the provision of longer-term rental property over short-term holiday lets. From April this year the final phase of reducing mortgage interest relief for landlords to the basic rate of income tax will be completed. This measure does not apply though to furnished holiday lets. This has encouraged the removal of properties from the long-term market for use as short-term holiday lets.
As Ben Beadle, comments:
“To be taxing long term homes to rent less favourably than holiday lets is simply bizarre. It completely undermines efforts by the Government to encourage the provision of long term, secure housing.
“It is time for the Government to realise that its tax policies have created a shortage of rented housing. This can only mean higher rents and reduced choice for renters. This is not going to do much for the levelling up agenda.”
- Government data on the number of empty dwellings in England can be found in the tables at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/875344/LT_615.xls. This reports that as of October 2019 there were 648,114 vacant dwellings in England, of which 225,845 were classed as being long term vacant (those properties which have unoccupied and “substantially unfurnished” for over six months).
- RICS’ Residential Market Survey for December 2020 notes that: “In the lettings market, a headline net balance of +15% of contributors saw tenant demand pick up during December (non-seasonally adjusted monthly series). At the same time, landlord instructions being brought onto the rental market continued to dwindle, with a net balance of -12% of respondents seeing a decline. As a result, rental growth expectations for the coming three months strengthened slightly, as contributors across virtually all parts of the UK envisage rents rising over the near term. As has been the case for a number of months now, London remains a clear exception, where a net balance of -47% of participants anticipate rents declining in the three months ahead.” Source: https://www.rics.org/globalassets/rics-website/media/market-surveys/residential-market-surveys/12._web_-december_2020_rics_uk_residential_market_survey_final.pdf
- Rightmove’s Rental Trends Tracker for Q4 2020 can be accessed at: https://www.rightmove.co.uk/news/content/uploads/2021/01/Rental-Trends-Tracker-Q4-2020-FINAL.pdf.
- Research published last year by Aldermore suggests that £3.61bn is being injected into local businesses across the UK every year from landlords. Details can be accessed at: https://www.aldermore.co.uk/about-us/newsroom/2020/02/landlords-inject-361bn-annually-into-local-economies-across-the-uk-aldermore-research-shows/.
- HMRC’s policy paper, “Restricting finance cost relief for individual landlords” can be accessed at: https://www.gov.uk/government/publications/restricting-finance-cost-relief-for-individual-landlords/restricting-finance-cost-relief-for-individual-landlords. It notes that the changes to mortgage interest relief do not apply “where the property meets all the criteria to be a furnished holiday letting.”