Conservative MP asks – Why are we clobbering landlords?

by Property 118

9:41 AM, 31st May 2016
About 2 years ago

Conservative MP asks – Why are we clobbering landlords?

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Conservative MP asks – Why are we clobbering landlords?

David jonesDavid Jones the former Welsh Secretary and MP for Clwyd West has written an article in the Conservativehome online magazine titled: Why are we clobbering people who provide homes to rent?

Click Here to view the article which is also copied below:

“For all the Government’s laudable ambitions to support home ownership, the country still needs a lot more homes for private rent. Savills has predicted that a million new rental homes will be needed by 2021.  The Treasury Select Committee, too, has argued that ministers need to do more to boost the supply of homes to rent, alongside efforts to increase owner-occupied properties. Rented housing is also critical to supporting a flexible labour market.

To ensure the extra supply of rented accommodation, the Chancellor should now reassess the  campaign he is pursuing against landlords. To see rented housing as the enemy of owner occupation is misplaced and counterproductive to addressing the country’s housing needs.

Contrary to popular myth, landlords are not taxed more favourably than home owners. As the Institute for Fiscal Studies has noted: “The tax system is not, and was not, even before the recent changes, more generous to people buying to let.”

No evidence has been produced by the Treasury to support its argument that landlords are competing for the same properties as first-time buyers and are therefore denying opportunities for home ownership.  Professor Michael Ball of Reading University has noted that many properties bought to rent, such as houses in multiple occupation, are often unappealing to first time buyers.

As a party, we should ask ourselves why we clobbering a group of people who, having been hit by Gordon Brown’s pension credit reforms, decided to invest in property as a way of providing financial security for themselves and their families.

The assaults on landlords through the tax system, including restricting mortgage interest relief to the basic rate of income tax and a three per cent point levy on stamp duty for the purchase of homes to rent, will both deter investment and drive up rents. Landlords will seek, not unreasonably, to recoup these extra costs. The Treasury Select Committee argued that if the stamp duty levy did not result in higher rents “it could not be claimed to support home ownership.”

It is little wonder that, following the Budget in March, a survey by the Residential Landlords Association (RLA) found that 78 per cent of landlords felt that the tax changes would deter them from investing in more rented properties, so making it more difficult and expensive for tenants to find the accommodation they need.

Ministers have argued that they are encouraging corporate landlords through various schemes such as the build to rent fund. That is to be welcomed. However, it should not come at the expense of discouraging the private individuals who make up the vast majority of the country’s landlords.

Corporate investors are good at building to scale.  However, given the size of new housing developments and associated infrastructure, they cannot deliver new homes quickly enough.  Nor do corporate landlords always provide new housing where people want to live, concentrating, as they do, on prime sites in town centres. We need new homes to rent now, not at some ill-defined point in the future. We also need more rented accommodation in small towns, suburbs and rural areas, where private landlords predominate.

By far the best option would be for the Government to row back from its unhelpful reforms. They will hurt both tenants and landlords, and serve only to make the housing crisis worse. The Finance Bill, awaiting detailed scrutiny in the Commons, provides the best opportunity to make the changes needed.

First, to support tenants into home ownership, the new 20 per cent Capital Gains Tax (CGT) rate should be applied to landlords prepared to sell their property to an occupying tenant. RLA research has found that 77 per cent of private landlords would consider selling their property to tenants under such circumstances.  The policy is supported also by the Royal Institution of Chartered Surveyors.

Second, there should be an exemption for landlords from the extra Stamp Duty levy where they invest in property that adds to the net supply of housing.  This would be attractive to 39 per cent of landlords who have reported that they would be more likely to invest in new build rented housing if this was the case.

Third, the Government needs to address the unfairness in its mortgage interest changes.  In a survey of almost 1,200 landlords, of those currently paying the basic rate of income tax, over 60 per cent said that the changes would push them into a higher rate of tax, despite their having no increase in their income. This is because tax will now be applied to turnover, rather than profit. Ministers still have time to reverse this profoundly un-Conservative measure, the basis for which remains unclear.

None of these changes would detract from the Government’s ambitions for wider home ownership; in fact, through the suggested CGT change and reduced costs, they would positively help tenants get on to the housing ladder. Margaret Thatcher showed that there need not be a trade-off between home ownership and boosting the supply of private rented housing. That truth remains today.”



Comments

Barry Fitzpatrick

11:20 AM, 31st May 2016
About 2 years ago

I've just sent the following email to David Jones and I would encourage you to do the same. His email address is: officeofdavidjonesmp@parliament.uk

Dear David,

Although not one of your constituents, having read your recent article on the Conservative Home website may I congratulate you on being one of the first MPs to publicly recognise the impacts of recent changes in the taxation of Landlords. Yes, I am a Landlord myself, and by far the most damaging is the change to mortgage interest relief. This change will be devastating to many Landlords but just as if the Government had increased fuel duty on petrol and diesel this extra tax will be borne by the customers of Landlords (i.e. Tenants). For this reason this tax hike has been dubbed the “Tenant Tax”.

For affected Landlords (and this is the injustice of this tax as it doesn’t affect Landlords who own properties in a limited company structure or are unencumbered) they will pass this extra cost onto their Tenants who will face increases, when fully implemented, of 20-40%, and where market condition preclude this, Landlords will have to sell up, and have to evict the Tenants to do so. Either way the Tenants suffer. This will probably follow the same path as happened in Ireland 16 years ago when a similar tax change was introduced.

This tax goes against the time honoured principle of profit=revenue-costs, with tax being levied upon profits. Which gives rise to anomalies such as tax being due on a loss, and rates of taxation in excess of 100%. This is counter to the Conservative principles of lower taxation and this in a situation where affected Landlords are already paying tax on their profits at 40% or 45% (whereas incorporated Landlords would only be paying 20% tax). You also rightly point out that some basic rate taxpayer Landlords will be pushed into the Higher Rate bracket for tax purposes even those their income will not have changed, this in turn has consequences regarding things like Child Benefit, and Child Maintenance payments, and now Dividend Tax.

Increasing rents will in turn make it even harder for Tenants to save for a deposit on a house of their own, which is totally counter to the Conservative Parties policy of home-ownership.

The Tenants who will suffer the worst will be those least able to cope i.e. those people at the lowest end of our society – those on Housing benefits. Housing benefit having been frozen will force these people to move to lower cost areas, or fall back on their Local Council to be housed by them (probably in very expensive Bed & breakfast type accommodation as fewer Landlords will be able to afford or be willing to house them). The cost in terms of upheaval, stress and misery will be enormous.
This measure which has been condemned by many independent, respected public bodies including The Institute for Fiscal Studies, IFS, to whom David Cameron recently commented on the BBC as “The Institute for Fiscal Studies is the gold standard in independent impartial economic forecasting and commentary in our country. It's accepted by every political party.”
You’ll be aware that a group of Landlords are making a legal challenge to this legislation, but I would hope that the Government comes to its senses and reverses this ill-thought out, and damaging legislation.

michael fickling

11:30 AM, 31st May 2016
About 2 years ago

RESPONSE to David Jones Conserv. MP...Very well put,and of perfect length to get across the key points regarding the ouctomes of clause 24 in the real world and the real world situation regarding housing our population generally and also notably..the fact that this clause makes no sense in terms of the real pre existing situation on tax or even the core principles of conservative politics.
Very well done and we should make good use of it in both our general campaign against clause 24 and the pending court case.
The writer has shown some courage as well as common sense and perhaps deserves some more "official" response showing our gratitude.

11:32 AM, 31st May 2016
About 2 years ago

I have copied the above from MP David Jones and forwarded it to my MP and would suggest all Landlords do the same, asking their MP to support Mr Jones.

Denise G

12:21 PM, 31st May 2016
About 2 years ago

Who would ever have thought I would write commending a Conservative MP???
I have also written to my own (Tory) MP asking her to support David Jones in his endeavours on our behalf

Rob Crawford

12:42 PM, 31st May 2016
About 2 years ago

I discussed the issues with my local MP, Luke Hall, who responded with the George Osborne party line that I expected! It's refreshing at least to see that David Jones has the balls to voice his opinion in contradiction to the party brief. We really need to build on his views and the Tenant Tax Summit later on 9th June is a good start!

Dr Rosalind Beck

13:26 PM, 31st May 2016
About 2 years ago

Reply to the comment left by "Chris Daniel" at "31/05/2016 - 11:32":

I think that is a great idea, Chris and I will be sending the link to my MP now. He is the Labour MP, Wayne David, and although he told me he was supportive of landlords he recently put his name to a standard, pathetic Labour Party email...

BTW, tomorrow at 4pm the Express is holding a Referendum debate. It includes the marvellous Siobhain McDonagh, who believes Section 24 doesn't go far enough and she would like landlords to face an even more draconian tax regime - she knows all about the PRS, having worked 'at the coalface', including arguing with landlords to provide housing for difficult to house (i.e. high-risk) tenants and then, when they default on the rent, advising them to sit tight until the bailiffs come (causing massive stress for soft-hearted and/or decent landlords trying to help out and sometimes ruining their finances so they have to sell up because of the thousands in lost rent).

Also, Jacob Rees-Mogg will be debating for the other side. I wrote to him this week as he is fed up of the Treasury and the Bank of England spouting nonsense and had written an article about it in Mail on Sunday - I gave him the link to my article on this very theme and invited him to use our situation to back up his argument and also to give us publicity. Even when we don't get answers to these emails to politicians, journalists, whomever, I think it plants a seed which may later sprout.

Right: I will now write to my MP.

Brian Jackson

14:08 PM, 31st May 2016
About 2 years ago

I would love to email my MP but it is George Osborne,and I have already written to him and received a standard non informative non responsive reply

Denise G

14:13 PM, 31st May 2016
About 2 years ago

Poor you!

But I would still e mail him over a copy of the article (possibly a Ladybird version with pictures to clarify the content, as I'm thinking maybe he can't actually read and/or understand all of the information that has been written condemning his madness over this?)

Brian Jackson

14:46 PM, 31st May 2016
About 2 years ago

Reply to the comment left by "D D" at "31/05/2016 - 14:13":

Better to meet him face to face with all the facts I can muster. Which I intend to do!!

Dr Rosalind Beck

16:08 PM, 31st May 2016
About 2 years ago

Reply to the comment left by "Brian Jackson" at "31/05/2016 - 14:46":

Nice one Brian. I'm sure we could get some ideas to you if you like. One of our members has seen Michael Fallon a few times and managed to counter any argument he came up with. She also went with another member of 118 for back-up. If you would like that kind of help, give me your email address and I'll put you in touch with the member of 118.

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