Open Letter To Grant Shapps and the BBC – Clause 24

Open Letter To Grant Shapps and the BBC – Clause 24

22:17 PM, 22nd January 2016, About 6 years ago 66

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I’ve shared this email to my MP, Grant Shapps, on another thread where a prominent poster has suggested that I post it on a new discussion. Open Letter To Grant Shapps and the BBC - Clause 24

I emailed Grant Shapps on 7th January 2016. He acknowledged, but I received no further reply. I emailed him yesterday morning giving him the chance to reply, and informed him that I would be sending it to the BBC today (22/01/16).

“Dear Grant

I voted Tory at the last election. I’ve always considered myself a classic Tory voter, although I have voted for other parties in two elections: Blair, unfortunately wooed me first time round, and the coalition was partly down to me. Other than that, I’ve always voted Tory.

I’ve always found politics a pretty frustrating field where anyone can promise what they want and do something else and not be held to account. A manifesto can only be relied upon as a hugely inflated list of things a party will dream up in order to attract voters. Why on earth we haven’t a system in place which renders a manifesto something like a contractual offer where there are penalties if promises are broken is beyond me. It’s no wonder the electorate is so utterly fed-up with politicians and all parties. Nothing a politician or party says can be relied upon, which makes a mockery of democracy. I choose who to vote for based on what they tell me they stand for and what is written in their manifesto.

Since the last election, I have regretted my vote more than at any other time in my life, for both local and national elections. I took time to read the summary manifestos for the three parties I would consider voting for so that I could make the best choice for me, my family and the nation. No one party was going to offer everything to suit me, but as usual, the Tories were going to allow me to continue to work hard, invest in property for my future pension provisions as a sideline, and would probably handle the economy better than any other party.

The first decision George Osborne made which angered me was the abolition of tax credits for working people. I don’t get tax credits, despite being a single parent due to me just about breaking into the 40% tax bracket, but one thing I’m very happy for my taxes to be spent on is help for those who strive to work to make ends meet rather than staying on full welfare. I cannot for the life of me work out how this was ever considered by the Tory party. Aren’t you supposed to be encouraging people back to work? The most sickening part was the disingenuous clap-trap being spouted by GO and the party of how this would be set-off against increases in minimum wage. Many of these people were struggling anyway, how one earth would an immediate cut in tax credits be alleviated by increase in minimum wage in a few years? How many people on tax credits are above the minimum wage anyway?

The welfare slashes to the Disabled and Elderly are sickening. I don’t know enough about these to comment.

As mentioned, I’m a single parent with a job. Since I don’t have a pension, 4 years ago I entered into property investment via let-to-buy and downgrading my living arrangements. The following year I moved again, and let out a second home. This has stretched me financially, but no more than I had planned and it is all part of my strategy to provide for myself in the future, and my son through university.

I have excellent tenants in both properties. One family have been with me for just over two years. They are in their 50s and their grown up son lives with them. They have good jobs – she is a nurse, he is a plumber. I believe the son is an electrician. They moved into my house after having their home repossessed. I was extremely nervous about taking them on, but luckily, it has proved to be a very good decision. They love their home, and I’m very happy to have them looking after it. I have not increased their rent since they’ve been here as I had no reason to do so. My costs hadn’t increased significantly, and a good tenant is worth looking after and hanging on to. Unfortunately, due to the tax changes being brought in, I will be notifying them of a rent rise this month, which will reflect rent rises by corporate LLs in the area, approximately 10% for the period. In the notice of rent rise, I will be explaining exactly why I’m doing this. Every single LL I know will be doing the same. With just two properties, since I am in the 40% tax band, and I will now be paying tax on £19K on mortgages per year, I will have to keep rents bang up to the maximum the market permits. Since demand for rental is so high, and my properties are lovely, I foresee no problems with retaining or replacing tenants if they chose to move due to rent rises.

My second tenants are new to me since August. They seem lovely, and were desperate to move into my home and I was delighted they cleared all the checks and referencing. They were worried as they had some concern about their credit history due to some missed CC payments. I don’t know why they choose to rent, but they were at their last rented property for 23 years, and only chose to move as the LL was selling. They have good jobs – she works in a hospice, and he is a football scout. I had no intention of increasing their rent as I want them to stay with me as long as possible, but I will now be increasing rents annually in accordance with the Housing Act.

Do you think either of my tenants could secure mortgages if they wanted to?

I hope I will be able to make the finances work after clause 24 through rent increases, and possible remortgaging (I certainly can’t work any harder), but if not then I will need to evict my tenants and sell my properties. That’s two families evicted and me with no pension provision for the future. That really was not what I expected as the outcome of me voting Tory.

I know directly, and indirectly through social media, hundreds of LLs, and we are all good LLs, intent on looking after our tenants, complying with continual changes in legislation, and paying our taxes on income (profit) fairly.

No LL I know understands the logic behind C24. What particularly puzzles me is that Tories traditionally support those who want to work hard and provide for themselves, as well as encouraging entrepreneurialism. After all, we all know that stimulating the micro economy boosts the macro economy.

But what sickens me (and I’m not overemphasising that) is the absolute discrimination in favour of the wealthy elite and large corporations. This is what the Tories now stand for! Corporations are exempt from the policy as are those with more than 15 properties! I’m speechless! What formula was used to calculate the 15 property exemption number? Is that the minimum number of properties the average Tory MP owns? Certainly Osborne and his family who have benefitted very well in their property investments from some Maverick tax avoidance.

In summary, I’d like to point out, through my experience and knowledge of the sector, the effects of c24:

  1. Rents WILL rise. The RICS estimates by 25% by 2020. I think that’s a fair average. Many LLs like myself with good tenants may introduce higher rent rises than that to catch up with the market.
  2. Tenants will be evicted as some LLs will sell some properties. This may be simply because they choose to get out of the game since it is no longer profitable, or because being taxed on turnover will actually push them into a deficit. These LLs were operating on tight margins anyway, and interest rises may have eventually hit them, but it’s still stress and upheaval for tenants.
  3. Corporations will buy up rental stock sold off from the PRS. Corporate LLs will absolutely maximise profits and increase rents as much as the market permits.
  4. Hundreds of thousands of PAYE workers like me will chose to opt out of the market as it is no longer a viable pension investment option. That means hundreds of thousands of people without pension provisions in the future. Further pressure on that deafeningly loud tick of the pension time bomb that this country will very soon be unable to ignore, like your government is doing.
  5.  There will be NO increase in housing stock. But there will be a further shortage of housing for families like my tenants who cannot buy as they are unable to secure mortgages. What is to happen to them? Temporary accommodation or LA social housing? We don’t have enough of that, and the council certainly couldn’t afford it. There will be a catastrophic effect on the social housing sector directly as a result of this policy and its decimation of the private rental sector. 
  6. The loss of the next election for Tories. Unless there are fundamental changes, and a return to the core values and policies of the Tory party, I will not be voting for you again. Of the estimated 3m LLs in this country, I’d say a good 50% of them must be straight forward Tory voters. Not anymore. The LL community it absolutely outraged at clause 24. Many many have said that they will never vote Tory again. I chose Tory last time as they offered the best for me and the nation; now you attack everyone including the poor, the sick, the elderly and middle income core Tories like me. The only people the Tories look after are the extremely wealthy and big business. The Bullingdon Club Party.

I understand the need to steady the housing market, and make it easier, or even possible for first time buyers to get onto the housing ladder, but clause 24 is not going to do either. It’s so badly thought out, in fact, I struggle to believe it was thought through at all. The only benefit it will bring is to the wealthy elite and big corporations due to the competitive advantage it will give them through tax advantages over the little players like me.

Yours sincerely,

Rachel Hodge
ex-Tory voter”



Comments

by Rachel Hodge

20:33 PM, 20th February 2016, About 6 years ago

Exactly Andy.

We're all in danger of getting lost in the fog. The simple fact is the only way to solve the housing crisis is to build more houses, and increase supply.

Increasing taxes on LLs is not going to increase the number of houses.

by Andy Loveday

20:40 PM, 20th February 2016, About 6 years ago

Reply to the comment left by "Rachel Hodge" at "20/02/2016 - 20:33":

Rachel,

We are clearly on the same page.

by Miascot

18:51 PM, 28th February 2016, About 6 years ago

Great letter Rachel and I hope it prompts some action somewhere along the line and helps reverse this scandalous tax on landlords.

I have more than 60 properties with the majority of tenants on housing benefit and zero chance of getting a mortgage! I have had most for more than 8 years, feel I am responsible for a large part of their lives (shelter) and really don't know what I am going to do. 30 mortgages are at 4.95% so these will be the first to go. That is 30 families evicted unless someone wants to buy them as a going concern. Downside here is that anyone with that kind of money will want my property BMV which I am unable to do as most of the properties are under water or just about equal to what I paid.

I read in your post something that has given me a glimmer of hope

Corporations are exempt from the policy as are those with more than 15 properties! I’m speechless! What formula was used to calculate the 15 property exemption number?

Is this true? is there hope for my situation? All properties are in joint names with my wife and all highly leveraged.

Thanks to all who are actively fighting the cause

by Rachel Hodge

22:08 PM, 28th February 2016, About 6 years ago

Hi Mia,

Unfortunately, it seems the 15 property part doesn't apply. I think that was some misinformation in the early days and a cross over with the stamp duty increase.

The *purchase* of 15 or more properties is exempt from the increased stamp duty tax. After all, it's the Tory way. Tax grab from the masses, but make sure the wealthy elite are exempt.

Good luck with working your way through this.

All the best,

Rachel

by Ramus Wood

12:03 PM, 29th February 2016, About 6 years ago

Reply to the comment left by "mia scot" at "28/02/2016 - 18:51":

Mia/Scot - you say that "30 mortgages are at 4.95% so these will be the first to go. "

Why are you not remortgaging these to lower rates? Are they SO under water that you cannot do that?

You need to sit down and look at each property (all 60, not just the 30 bad apples) ON ITS OWN, and see:
- purchase price
- any expenses that you can deduct for CGT purposes (e.g. improvements when you bought them, legal costs when you bought, etc.)
- current value
- current mortgage
- current equity
- current rent
- market rent for that property
- can you increase rent?

Are there some that have some equity that you could either sell or remortgage so that you can pay down some other mortgages so you can refinance as many as possible onto better rates?

Can you divert some of your rent (or other) income to pay down mortgages so you reduce leverage and can remortgage to better rates? Can you "borrow" from your savings to reduce LTVs - so you can remortgage to better rates?

Can you increase rents on any/some/all of your properties?

It's a big job but you have to do it, so if you haven't already done the above analysis, start somewhere.

by Miascot

12:34 PM, 29th February 2016, About 6 years ago

Hi Ramus

Thanks for taking the time to comment

It is indeed a big job and I am on the case - unfortunately my brain does not work well with finances and I am almost solely dependant on others for financial advice which varies particularly with me being in Scotland and Scottish law differing from English where most of the activity seems to be.

I believe the mortgages could fall to around the 4% if the values stacked up! they would with some properties but not with others. The mortgage guy wants current values but also wants me to meet with another accountant to see if I should incorporate before March 31st but he didn't come back to me to arrange a meeting yet and time is rolling in. I fear spending a fortune incorporating some of the properties (using my nest egg) then the chancellor does a Uturn and it was all to no avail plus I have tied up all my cash in property.

I have been increasing my rents since August last year but not pushing too hard as this has not happened yet and my good long-term tenants should not have to pay for a possibility. Some were pretty low and these have been changed but the others are fair and currently profitable and I hesitate to increase them for fear of voids and tenant hardship.

In hindsight I should have paid down the mortgages but was told this was a dumb thing to do as the interest was tax deductible and the money should be used elsewhere. I could inject some cash into the portfolio but it would be just a drop in the ocean and possibly throwing good money after bad if I am going to go down the tubes anyway.

If you or anyone else on the forum have a good eye for finances and would like to take a look at the portfolio and offer your thoughts, that would be very much appreciated

I am 52 and would like to stay in the "business" but only if it is viable! I fear an interest rate increase along with these changes which will surely see me into bankruptcy and total loss of everything I have earned over the years. Riding the storm is a gamble as the prices can go either way - timing is everything!

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