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The Chancellor must use his first Budget to take immediate action to reverse the decline in the supply of rented housing, say landlords.
With landlords selling more properties than they are buying and others switching to short-term holiday lets for tax reasons, unless action is taken tenants are going to find it increasingly hard to find the home they want.
The 3% stamp duty levy on extra housing introduced in 2016, among other measures, has slowed investment in new rented property, with landlord confidence now extremely low. This drain in rental accommodation is being exacerbated by landlords being incentivised by the tax system to switch their properties to short-term lets. As a result, ARLA Propertymark has warned that almost half a million properties could be left unavailable for tenants in need of long-term homes to rent.
In their submission for the Budget, the Residential Landlords Association and the National Landlords Association argue that the tax system entirely contradicts the Government’s housing objectives.
The RLA and the NLA are calling for a fundamental review of the way rented housing is taxed to ensure that tax policy supports, rather than contradicts, government objectives. They propose that the stamp duty levy is dropped where landlords add to the net supply of housing through developing new properties, bringing empty homes back into use, or converting large properties into smaller, more affordable units of accommodation.
They propose that tenants are supported into homeownership by introducing a Capital Gains Tax exemption where landlords sell a property to a sitting tenant. In addition, they call for tax relief where landlords invest in measures to improve the energy efficiency of a rented property or let adapted properties long-term to tenants with accessibility needs.
David Smith, Policy Director for the Residential Landlords Association, said:
“The tax system for rented housing is failing. It encourages the provision of holiday homes over long-term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.
“For the sake of those living in rented housing or who are looking for accommodation, Ministers need to use the Budget to urgently change course to ensure that their tax policies are positively aligned with their wider housing objectives to encourage good landlords to provide long-term affordable housing.”
Chris Norris, Director of Policy and Practice at the National Landlords Association, said:
“The tax system with which landlords must contend is no-longer fit for purpose. HM Treasury has constructed a series of barriers to investment, which make running an efficient and successful lettings business borderline impossible.
“As he prepares his first Budget, we hope that the Chancellor will take the opportunity to use taxation to encourage investment in new and existing homes alike. Mr Sunak must recognise that housing costs can only be reduced by making it easier, not harder, to provide good quality rented homes.
“The emphasis must be on finding solutions and encouraging investment across tenures amongst a diverse range of providers.”
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