Boost rented home supply by scrapping mortgage tax relief – call

Boost rented home supply by scrapping mortgage tax relief – call

9:16 AM, 26th May 2023, About A year ago 16

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As the UK grapples with a housing crisis, new research indicates that abolishing a tax increase on rented housing could help alleviate the situation.

Capital Economics has conducted an analysis for the National Residential Landlords Association (NRLA) which suggests that reinstating mortgage interest relief (MIR) in full for the private rented sector could ease the supply crisis.

Modelling carried out by researchers shows that if the Bank of England’s base interest rate reaches 5% and remains above 2.5% until 2027, up to 735,000 private rented properties (13%) could be lost across the country in comparison to 2021.

This could result in a loss of £1bn of Income and Corporation Tax revenue each year for the Treasury.

‘Government said it wanted to ‘create a more level playing field’

The NRLA’s chief executive, Ben Beadle, said: “In 2015, the government said it wanted to ‘create a more level playing field between those buying a home to let and those buying a home to live in’.

“In doing so it hiked costs for responsible landlords and totally ignored the burden it would create for renters.

“In the midst of an unprecedented cost-of-living crisis, the government needs to put economic reality before political pride and reverse this travesty of a reform.”

Mortgage interest tax relief for landlords

Since 2021, mortgage interest tax relief for landlords has been limited to the basic rate of income tax.

And Capital Economics also found that scrapping the mortgage interest reforms could reduce future rental inflation in the sector and reduce financial pressures on landlords’ planning maintenance and improvements.

The NRLA is now calling on the Government to undertake a full review to examine the impact of recent tax rises on the sector.

‘Tax hikes on landlords’

Mr Beadle continued: “Tax hikes on landlords, exacerbated by rising interest rates, have deepened the supply crisis.

“And as this research demonstrates the situation is unlikely to improve until and unless it is reversed.

“A radical rejection of these damaging policies is necessary to help stem the tide of lost rental properties, limit rent rises and boost Treasury revenue.”

110,000 fewer properties lost from the private rental market

The research highlights that with MIR fully reinstated, there would be 110,000 fewer properties lost from the private rental market – and the Treasury would get a £400m boost in Income and Corporation Tax.

The news comes as renters across the UK are struggling to find homes due to a lack of available properties.

The Bank of England, the government and the cross-party Housing Select Committee are among those to have warned that demand across the private rented sector is outstripping supply.

The NRLA says it is essential for the government to take swift action to ensure there is enough housing stock for those who need it most.


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Comments

john thompson

10:15 AM, 26th May 2023, About A year ago

The government doesn't give a toss about landlords or tennants, they are just chasing votes, and sticking it to landlords is a great vote winner. Bugger the long-term consequences for tenants and landlords. As for tax losses they'll screw it back out of us in verious other 'creative' ways.

Andrew Dove

10:42 AM, 26th May 2023, About A year ago

I have built a calculator which demonstrates why anyone with an average yielding buy to let facing refinancing with a 40% marginal tax and direct ownership, might consider selling up and fast.
rentyieldcalculator.co.uk

Crouchender

12:06 PM, 26th May 2023, About A year ago

Great idea with calculator but i does not go over £400,000 valuation so difficult for us London based LLs to use as we know yields in London are low so very important to get the numbers right. Can you fix the glitch so we can input our own numbers. i.e Even rental growth is set at say 0,10 % but I can't input my own prediction.e.g 5%

Andrew Dove

12:55 PM, 26th May 2023, About A year ago

Reply to the comment left by Crouchender at 26/05/2023 - 12:06
I appreciate the suggestions which I have now made live. Feel free to get in touch with me directly as I will continue to tweak based on any feedback.

JB

14:48 PM, 26th May 2023, About A year ago

Think of all the lovely CGT and SDLT the government will take!

Raz

18:31 PM, 26th May 2023, About A year ago

Still not going far enough. While Spain has just brought in stronger anti-eviction laws like us, they have also introduced an incentivised affordable housing concept- 50% tax reduction on personal income tax for new rental contracts. Is this the way forward for UK too?

https://www.surinenglish.com/spain/spains-new-housing-law-which-imposes-new-20230525120549-nt.html

Crouchender

22:50 PM, 26th May 2023, About A year ago

Reply to the comment left by Andrew Dove at 26/05/2023 - 10:42
I can't increase the rent to over |£2000 so maybe more tweaks required?

Crouchender

23:00 PM, 26th May 2023, About A year ago

Reply to the comment left by Andrew Dove at 26/05/2023 - 12:55
The calc is very useful as can predict and plan for labour policies

i.e. 28% to 40% CGT from 1st day of Labour/ Liberal 'emergency budget'

Unearned income say to have a NI loading of maybe 10% so marginal tax rate increases from current rate plus 10%!

This is incredibly insightful as we are all interested in yield but it will wake up a lot of LLs who are leveraged in expensive cities to sell up making supply worse for existing tenants and then we will all be ripe for rent caps of say 3% per annum as the SNP has forced through. Again this calc can cope with those policy changes so the key is to scenario plan for each LL.

Dylan Morris

10:38 AM, 27th May 2023, About A year ago

Reply to the comment left by Crouchender at 26/05/2023 - 23:00And there are a few other things:
1) removal of the 20% mortgage interest tax credit
2) PRS Right To Buy
3) eviction bans due to the cost of living crisis

Andrew Dove

11:12 AM, 27th May 2023, About A year ago

Reply to the comment left by Crouchender at 26/05/2023 - 22:50
I have now fixed and made live.

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