Boost rented home supply by scrapping mortgage tax relief – call

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.