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9:40 AM, 11th November 2019, About 4 years ago 16
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An article was published in the Daily Telegraph that resurrects the idea the Conservatives should introduce a new Right to Buy from private landlords in their manifesto. It’s not unknown for articles to be floated in the DT to test for a public reaction, and the timing now may not be coincidence. If you’re as concerned as I am, please contact your Conservative Party candidate – if it is being discussed, some quick feedback might put them off.
Useful article here: https://www.property118.com/ifs-report-counters-george-osbornes-justification-of-section-24/
For those who haven’t seen the article, full text is here:
“Britain has a housing crisis. In the exaggeration of our times, it might even be called an “emergency”. Yet the Tories appear to have few coherent answers and, as on much else beyond Brexit, are in danger of being outmanoeuvred by the apparatchiks of Corbyn’s Labour.
For those who know anything about the political economy, Labour’s economic and industrial agenda is a horror story of Hugo Chavez-like proportions – one that would replace the market with a state-controlled alternative, where politicians, not market forces, determine allocation and distribution of capital.
Commentators have tended to focus their condemnation on the fiscal profligacy of Labour’s plans, but this is by no means the chief concern; the Tories too are promising big increases in state-directed capital spending.
Corbyn’s magic money tree is nonetheless qualitatively very different and much more dangerous, with virtually everything, including pricing mechanisms and capital flows, becoming beholden to the political foibles of the planned economy. All such experiments to date have ended in disaster. On the 30th anniversary of the fall of the Berlin Wall, voters should need no reminding.
Even five years ago, it would be hard to imagine anything more than marginal electoral support for such an agenda. Yet the collective madness of Brexit has so inflamed passions, alienating large parts of the traditional Tory vote, that there is an outside chance it might sneak through, via the backdoor as it were. There is also no denying that Labour populism seductively taps into a rich seam of contemporary discontents. Astonishingly, Labour has even managed to hijack some potentially very popular ideas from the Right.
Extension of right to buy – one of the most successful policies of the Thatcherite era – to tenants of private landlords is one such policy. Done the correct way, this could be a real vote-winner, as the Centre for Policy Studies (CPS) explained in a well argued paper – Right to Own – a year ago. Variations of the CPS proposals have long been under consideration in the No 10 Policy unit but, like so much else eclipsed by Brexit, have failed to see the light of day.
A little background. The idea that Britain still has high levels of home ownership is a myth. At 64 per cent of households, the UK ranks a lowly 44th in the world and is fourth from the bottom in the EU. It was not always thus. Home ownership peaked at nearly 70 per cent in 2003, and but for a marginal uptick in the past year or two has been falling ever since.
The deterioration has been particularly acute among younger voters, or “generation rent” as they like to call themselves. In the 25-to-34 age bracket, home ownership plummeted to just 27 per cent in 2016, from 65 per cent two decades earlier. Since as a generalisation home owners tend to vote Tory but tenants Labour, this ought to be a matter of extreme concern to Conservative strategists.
According to analysis by Alex Morton, head of policy at the CPS, the problem was essentially created by Labour; by his estimation, incentives worth a staggering £220 billion for multi-home ownership were inadvertently provided via the pensions and mortgage interest relief systems across the Blair/Brown years.
Morton’s insight is that the problem is less that of inadequate social housing – the UK has one of the highest rates of social housing in the EU – but rather that those who would once have been natural home owners found themselves priced out of the market by heavily subsidised buy-to-let landlords. Low interest rates and heavy-handed mortgage regulation have compounded the barriers to home ownership.
Bold corrective action is both a moral and political imperative.
Home ownership is at the very core of small “c” conservatism, providing a store of value as well as a sense of belonging and security; it builds a strong work ethic, and it promotes better care of property and the immediate environment.
Obliging private landlords to sell at a discount to tenants would of course be a form of expropriation that no Tory government could support. Even the shadow chancellor, John McDonnell, seems to have recognised that it would likely, and rightly, be judged illegal by the courts. But there is nothing to stop the Government incentivising such a transfer in ownership, by for instance discounting the capital gains tax liability so that landlords don’t lose out.
Unfortunately, Labour is in a much better position to promote this form of sale than the Tories, if only because it loses no votes by taking a big stick to landlords. By imposing rent controls and significantly raising capital gains tax, it could substantially increase the incentives to sell to tenants.
Be that as it may, the Tories need quickly to climb aboard with “right to own” policies. The Government has already potentially deprived itself of votes by failing to carry out a manifesto commitment to extend the right to buy to England’s million-plus housing association tenants. Letdowns like this will not be forgotten on December 12.”
Simon
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Whiteskifreak Surrey
11:09 AM, 11th November 2019, About 4 years ago
Seems to me that the only direction for PRS is OUT! Thanks to Brexit the Pandora Box was widely opened...
Martin
11:48 AM, 11th November 2019, About 4 years ago
Playing Devils advocate here, my immediate and cynical thought with any right to buy scheme, presuming the level of discount is dependant on the time rented, would be that landlords would immediately put their property up for sale and serve notice on the tenant. Of course 3 months later when the overpriced property fails to sell the landlord would be "forced" to rent it out again as he can't sell it.
New tenants, no long term rental therefore no big discount/ incentive to buy.
Faced with the choice of losing tens or even hundreds of thousands versus a few months rent which way would you jump?
Then each year at the end of the AST give notice and repeat.
Couple that with every Landlord fighting every case is the courts every time the very idea of such a policy is hugely counterproductive and helps no one.
The net result would be fewer Landlords hence less housing and no long term tenants.
I simply cannot believe that either side has not arrived at this conclusion.
Hence any "right to buy" will have to be Government funded in one way or another and a mutual arrangement between Landlord and Tenant.
Political Parties will say many things in the run up to an election and follow through on very few.
If you are worried then write to your MP and state that in the event of a punitive right to buy policy you will immediately put your properties up for sale as you have decided to leave the PRS and unfortunately that will mean serving notice on your tenants.
SM
11:55 AM, 11th November 2019, About 4 years ago
Hi,
When did the article appear in the DT.
I'll write to my MP and suggest that MPs should be forced to sell there pensions to their constituents at a knock down price. Thats what she'd be doing to me if this one comes off.
Monty Bodkin
12:31 PM, 11th November 2019, About 4 years ago
In the paper mentioned, what the Tories are proposing is not a 'Right' to buy. It is an 'incentive' for tenants to buy and landlords to sell via some reduction in capital gains tax. They are not forcing landlords to sell.
IMO, loads of holes in it and massively over complicated. If they want landlords to sell, then simply cut CGT.
Kathy Evans
13:09 PM, 11th November 2019, About 4 years ago
Reply to the comment left by Monty Bodkin at 11/11/2019 - 12:31
No capital gains likely in the North east as prices are still really low. I think the surge in home ownership was actually an anomaly, not the norm. I rented when I was first married (as did all my neighbours), so did my parents. I think, if yo go back to post-war and before Thatcher's right to buy, home ownership and renting was about 50/50. Gen rent can't be bothered to save any money because they need a holiday and nights out and Netflix NOW, so of course they can't get a deposit, esp as mortgages are now much more tightly controlled
Martin
13:30 PM, 11th November 2019, About 4 years ago
Reply to the comment left by Monty Bodkin at 11/11/2019 - 12:31
Totally agree, level the playing field!
Didn't someone say that about mortgage tax relief?
Appalled Landlord
13:37 PM, 11th November 2019, About 4 years ago
In the Executive Summary of the report “From Rent to Buy”, Alex Morton wrote “The fall in owner-occupation was accelerated by a series of decisions by Tony Blair and Gordon Brown’s Governments: scrapping pension dividend relief and allowing interest deductibility for landlords but not owners”
https://www.cps.org.uk/files/reports/original/181015101703-FromRentToOwn.pdf
“Alex Morton is Head of Policy at the Centre for Policy Studies. He was previously a Director at Field Consulting, but before that was responsible for housing and planning in the No 10 Policy Unit under David Cameron, including working on key policies in the 2015 manifesto. He was previously Head of Housing at Policy Exchange”.
If this is the intellectual calibre of the Head of Policy at the Centre for Policy Studies then the decline in the UK is more desperate than I imagined.
Morton has fallen for the facile and false comparison of the deduction of a business expense for landlords against the abolition of MIRAS for owner-occupiers - which was just bunce for them, because there was no longer any tax for it to “relieve”.
This false comparison was promoted by David Kingman shortly after he graduated in Geography in 2013: https://www.property118.com/landlord-tax-grab-source-document-exposed/
It was repeated by George Osborne in his 2015 Summer Budget speech:
“Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers cannot.”
https://www.gov.uk/government/speeches/chancellor-george-osbornes-summer-budget-2015-speech about two-thirds of the way down
In that budget Osborne introduced a retroactive levy on the finance costs of individual landlords which means that the income tax on rental profit can exceed 100%, and will even be payable when a pre-tax loss has been made.
Dr Rosalind Beck
14:22 PM, 11th November 2019, About 4 years ago
I wrote a brief critique of the report when it came out:
https://www.conservativehome.com/platform/2018/10/rosalind-beck-why-the-cps-and-onwards-plans-for-housing-sales-to-private-tenants-are-wrong.html
Appalled Landlord
14:41 PM, 11th November 2019, About 4 years ago
In the Daily Telegraph article above, Jeremy Warner wrote “Morton’s insight is that the problem is less that of inadequate social housing – the UK has one of the highest rates of social housing in the EU – but rather that those who would once have been natural home owners found themselves priced out of the market by heavily subsidised buy-to-let landlords. Low interest rates and heavy-handed mortgage regulation have compounded the barriers to home ownership.”
This might look like a quote from Morton, but in fact it is all Warner’s own work. Morton’s report does not claim that landlords are subsidised, heavily or otherwise.
Furthermore, in his report Morton said that BTL only increased prices by 7%. He wrote “One government study in 2008 estimated that buy-to-let demand had increased house prices by 7% relative to where they would otherwise have been.”
It could be that Warner is a member of generation rent, although the photo above his article belies this. He seems to have absorbed David Kingman’s nonsense, however.
According to his profile on the Telegraph website, “Jeremy Warner, assistant editor of The Daily Telegraph, is one of Britain's leading business and economics commentators. A serial winner of awards, he has also been honoured for an "outstanding contribution in defence of freedom of the media" by the Society of Editors for his refusal to reveal sources to Government inspectors. He is @jeremywarneruk on Twitter”
If this is the intellectual calibre of a middle-aged Telegraph assistant editor then the decline in the UK is more desperate than I imagined.
Old Mrs Landlord
15:43 PM, 11th November 2019, About 4 years ago
Reply to the comment left by Kathy Evans at 11/11/2019 - 13:09So far, Kathy, you have been the only one to point out that many of us outside London don't have any capital gains or at least our gains don't exceed the CGT allowance. This inconvenient fact never seems to enter the consciousness of those who dream up housing policy. And, as SM points out, many of us need the income from our rental properties to supplement state pensions now or in the future. My total pension is £5,700 (state) plus £1,350 (personally funded, not employer subsidised) yet all I hear from Generation Rent is how privileged I am at their expense, and pensioners have stolen their future! It always seems to be that those who make sacrifices to provide for their own future are penalised to subsidise those who spend every penny they get.