Clause 24 and Housing Choice – An Open Letter to Labour MP Rob Marris


9:17 AM, 5th November 2015
About 4 years ago

Clause 24 and Housing Choice – An Open Letter to Labour MP Rob Marris

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Clause 24 and Housing Choice – An Open Letter to Labour MP Rob Marris
Rob Marris Labour MP

Rob Marris Labour MP

Dear Mr Marris,

I am writing to you in connection with Clause 24 of the Finance Bill which will restrict finance cost relief for individual landlords.

I am aware that you will have received a number of representations from landlords like me expressing their concerns about the Clause, a Clause which I know Labour is supporting.

I think we can agree that there is a housing crisis in the UK which is caused by a chronic shortage of supply. The question is how do we as a nation address the issue through policy.

Let me make it clear to you at the outset that I support proposals to increase home ownership. For some, home ownership is the right housing choice.

I also support proposals to increase the supply of affordable social rented homes because in many parts of the country demand for this type of housing far exceeds supply.

It will come as no surprise to you that I also support the need for a strong and growing private rented sector, because for many this is the right housing choice. It is a sector which has grown in response to demand, especially at a time when the population has been increasing, lending criteria for potential home owners has been tightened as a result of the Mortgage Market Review (MMR) and there has been a decline in the number of social rented housing, because of right to buy legislation.

As the housing problem is one of supply, what we need is more investment in housing of all tenures. We need housing choice and to appreciate that people may move to different tenures as their circumstances change.

The problem with Clause 24 is that it will force portfolio landlords to sell houses as their business model will no longer be sustainable. Regrettably, tenants will be evicted. For those landlords that try to remain in the sector, they will be forced to pass on their increased costs to their customers and put up rents. There is already evidence that landlords are responding to Clause 24 by increasing rents. Investment in the private rented sector will fall dramatically.

I have followed the debate about Clause 24 very closely since the Summer Budget announcement. What has come as a surprise is that the only people who are pointing out that many thousands of tenants will be adversely affected are landlords. I have not heard one MP say that they are concerned that the Government’s Clause 24 proposal could have unintended consequences and that this could include increased rents for tenants and increased homelessness as a result of tenant evictions. It seems to me that the less well off in society did not cause the banking crisis, but are having to pay to lower the deficit. It is a surprise to me that Labour are supporting a Clause that could result in the less well off being disadvantaged.

It would help my understanding of Labour’s position on Clause 24 if you could:

Confirm if you believe that rents won’t go up as a result of this measure and explain your reasoning;

Confirm if you believe that tenants will not be evicted as a result of landlords’ reactions to the measure and explain your reasoning;

Confirm if you believe that Clause 24 will have no impact on the level of homelessness and explain your reasoning;

Confirm how as a result of Clause 24 the supply of housing will increase.

If you agree with me that rents will go up and the level of homelessness will increase, can you confirm if you think this is a price worth paying to achieve greater home ownership?

Response from Mr Rob Marris MP for Wolverhampton South West

Thank you for your e-mail.

Clause 24 of the Finance Bill introduces a restriction on the deduction of finance costs related to let residential properties, and instead provides for a tax reduction for such costs by reference to the Basic Rate of Income Tax. To put it another way, the change will essentially prevent residential landlords claiming Income Tax relief at the Higher Rate on interest paid on loans to buy a property to rent.

To give landlords time to adjust, the restriction and tax reduction will change gradually from the tax year 2017-18 over 4 years.

The background is that persons subject to Income Tax are currently able to deduct interest and other finance costs, such as the fees incurred when obtaining or repaying a loan, from the rental income in arriving at the profits of the property business, where the costs are incurred wholly and exclusively for the purposes of the property business.

Individuals are also able to make a claim to deduct interest on a loan to invest in a partnership when calculating their net income.

Clause 24 restricts those deductions for finance costs relating to let residential properties, and instead allows for a deduction from an individual’s Income Tax liability. The maximum relief that can be obtained is the Basic Rate value (currently 20%) of the total finance costs on loans referable to let residential properties.

This clause will ensure that landlords with higher incomes no longer receive the most generous tax treatment. Despite the concerns raised eloquently by you and others, this still seems to Labour to be the right thing to do.

Regarding your 5 specific questions:

1. Rents should not go up as a result of this measure. The reason is that there is competition in the housing market and, due the chronic shortage of housing in many parts of the country, many landlords already charge what the market will bear.

2. Tenants should not be evicted as a result of landlords’ reactions to the measure. Legislation provides some protection for sitting tenants. If a landlord sells, it is likely to be another landlord who buys.

3. Clause 24 will have no impact on the level of homelessness. There will be just as many houses and flats after the introduction of this measure as there were before.

4. Clause 24 is unlikely to cause the supply of housing to increase.

5. N/A

Rob Marris

MP for Wolverhampton South West


Abdul Khan

9:56 AM, 6th November 2015
About 4 years ago

Reply to the comment left by "Carol Duckfield" at "06/11/2015 - 09:26":

Fully agree Carol. Basic facts and figures. I will draft something this weekend. If my understanding of this is correct, property turnover will artificially push people into higher tax brackets. Some will even lose personal allowance! Yet after the BTL mortgages are paid, the net profit would not cover the tax owed! I am yet to see a MP or HMRC simple example of this clause - before and after. If you debate with long text to a MP they waffle back and miss the points. We need direct sums. No wriggle room - hard facts.

Martin S

10:27 AM, 7th November 2015
About 4 years ago

In line with many others, I've written to my local MP, a Michelle Donelan, a Tory put in place by David Cameron, as you will see in my e-mail to her. Pointing this out is seen as impolite! The response is as expected, and is basically Tory party dogma regurgitated.

From what she says, 'Buy to let mortgages could pose a risk to the UK’s financial stability' it seems that it is us Landlords who are responsible for the current financial mess the country is in, rather than those greedy blighters in the banking industry, aided and abetted by their friends in Government!

From: Martin S
Sent: 24 October 2015 15:30
To: Michelle Donelan - Member of Parliament; DONELAN, Michelle
Subject: Proposed Tax Changes For Buy To Let Landlords

Dear Michelle

I know that you are new to this Parliamentary business, and still finding your feet, and as such have little or no real influence within the Tory party, but I'm still writing to you as my MP anyway. This lack of clout is particularly true, as you were one of the people parachuted into various Constituencies by David Cameron, and are therefore, in return, expected to toe the party line, and not create any waves, especially towards any of the 'big hitters' like Osborne.

However, as this is a subject close to my heart, having been a BTL landlord for the past 25 years, I can't let the matter pass without comment, although I know that in reality as my local MP, you are unable to do anything, even if you wished to do so. If you were to click on the link below, you will, should you read it, see what appears in writing below it, and sums up everything I would wish to say. If you do read it, then thank you for doing so, as you will be more aware of the reality of the situation, rather than the 'tosh' force fed you by the Mandarins in the Tory party.

Dear Martin,

Thank you for your email, although I the tone was perhaps a little impolite.

I am afraid I disagree with you and think it is right that the Government restricts the relief on finance costs that landlords of residential property can get to the basic rate of income tax.

The current tax system supports landlords over and above ordinary homeowners. We want to get more people to have the security of home ownership. Currently, landlords can deduct costs they incur when calculating the tax they pay on their rental income. A large portion of those costs are interest payments on the mortgage. Mortgage Interest Relief was withdrawn from homeowners 15 years ago. However, landlords still receive the relief. The ability to deduct these costs puts investing in a rental property at a huge advantage.

Tax relief for finance costs is particularly beneficial for wealthier landlords with larger incomes, as every £1 of finance cost they incur allows them to pay 40p or 45p less tax. At a time when the Government needs to increase revenue and reduce spending to get the public finances in shape I think that it is right and fair that wealthier landlords do not get a significant tax break like this. It is worth noting that the Bank of England has also noted in the recent Financial Stability Report that the rapid growth of buy to let mortgages could pose a risk to the UK’s financial stability.

To mitigate against the changes, the restriction will be phased in over 4 years, starting from April 2017. This will reduce the distorting effect the tax treatment of property has on investment and mean individual landlords are not treated differently based on the rate of income tax that they pay. It will also shift the balance between landlords and homeowners.

Best wishes,


James Fraser

10:51 AM, 7th November 2015
About 4 years ago

Oh dear! She is just sending out the pre-printed script isn't she? She clearly doesn't understand the differences between home ownership and business, nor that business expenses are neither free reliefs, nor generous, nor for the wealthy.

Thank you for sending her my submission though - she clearly didn't read it. Aren't they currently styling themselves as the low tax, caring party? Ask her how that works for landlords and tenants alike!

Abdul Khan

10:59 AM, 7th November 2015
About 4 years ago

Reply to the comment left by "Martin S" at "07/11/2015 - 10:27":

Hi Martin, thanks for posting. You should respond with a simple calculation - the long winded link was not read as it is long winded. Ask her to verify the calculation to see if she understands that is tax on turnover not profit. Then we can see if she really understands the implications.

James Fraser

11:00 AM, 7th November 2015
About 4 years ago

Actually, might be worth asking why she wasn't heard supporting the Greens on this during her election campaign? If she's so in favour of it, why did she not mention it? Was she instructed to keep quiet or did she not know about it? Does she now think the Greens are a credible party, as she wasn't (presumably) saying this before the election?

I'm utterly dismayed by the lack of originality or knowledge in her answer. She clearly has as much clue as the labour lot!

Martin S

20:51 PM, 8th November 2015
About 4 years ago

Dear Abdul - Do you seriously think that this new MP, who is beholden to David Cameron & George Osborne, is going to ignore the party line and their Whips? They tell her what she should & shouldn't be doing and thinking.

I'm not going to waste my time and energy trying to educate this person, as nothing will sink in. The galling thing is that only 24% of the British electorate voted for the Tories, but still we have a Government most of us didn't want!

Gareth Wilson

10:01 AM, 2nd January 2016
About 4 years ago

Mr Marris would benefit from multiple updates on the Spareroom survey and the Irish experience as detailed in Ros's recent article. So would everybody else's local MP.

Dr Rosalind Beck

10:09 AM, 2nd January 2016
About 4 years ago

Reply to the comment left by "Gareth Wilson" at "02/01/2016 - 10:01":

Good point, Gareth. I'll pass on the links today and if anyone else wants to as well that would be good as it has more impact.

Gareth Wilson

10:19 AM, 2nd January 2016
About 4 years ago

Reply to the comment left by "Ros ." at "02/01/2016 - 10:09":

Cheers Ros. Just to clarify when I said multiple updates I meant as in from the multitude of people to have had correspondence with him 🙂

Chris Byways

20:52 PM, 2nd January 2016
About 4 years ago

I had an email from persimmon, saying
The average house price in the West Midlands is £193,000*
Your mortgage breakdown of this could be:**
• 5% deposit: £9,650
• Mortgage amount: £183,350
• Mortgage term: 30 years
• Interest rate: 1.99%
Meaning you'd only have to pay...
£676.78 per month

So the FTB is not doing too badly, if they are renting for more than this why don't they buy?

If I had a 30 year mortgage I would be 100 before being paid off as long as I don't miss any payments, can't get a 95% loan, nor get a 1.99% rate either.

In reply to Marris, he doesn't understand C24 in the same way I do.

I think we are preaching to the converted. We have SO many different examples, we need just ONE example to show how it works, not from a £6m portfolio but a typical average landlord showing a loss by 2020, that can be used to combat the tripe Marris gives as the standard reply.

And answers to all his objections. Like why rents will have to go up due to the extra costs imposed, not to make obscene profits as they seem to think, but to just keep viable.

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