A Level Playing Field Between Homeowners and Landlords

A Level Playing Field Between Homeowners and Landlords

10:19 AM, 29th August 2015, About 6 years ago 94

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This is my third Open Letter to Mr George Freeman MP – Conservative, Mid Norfolk Level Playing Field Between Homeowners Landlords

A Level Playing Field Between Homeowners and Landlords

Dear Mr Freeman

A response was received this week to the petition to Government regarding the restrictions of finance cost relief to individual landlords. The key message seems to be that Government wishes to “level the field” for homeowners and landlords. I have given that a lot of thought, and on reflection I think I may have been wrong all along. I now agree the playing field should be levelled. I have listed how this might be achieved below:-

1) Homeowners do not receive tax relief of their mortgages at all. However, when they take a lodger into their home the first £7,500 of rent received is tax free. This should be extended to all rental properties, i.e. the first £7,500 from each unit upon which Council Tax is paid should receive the same £7,500 per annum tax free allowance.

2) When a homeowner sells their home the capital appreciation is not taxed. This should also be applied to each of their rental properties.

3) A homeowner is allowed £1million of IHT relief against the value of their home. This should be extended to equity in rental portfolios.

4) A homeowner is given the choice as to whether they should obtain a CP12 annual gas safety certificate. This should also be applied to tenants, not imposed upon landlords.

5) A homeowner is free to evict a lodger subject to providing “reasonable” notice, without having to refer to the Courts. This is very fair and prevents the Court systems from clogging. This should be extended to private landlords.

6) A homeowner is not required to protect a lodgers rent deposit in an approved government scheme. This should also be extended to private landlords.

7) Homeowners may choose to have as many people as they wish living in their home without the requirement to purchase a licence. If that home is considered to be overcrowded then Councils have the means to deal with that issue. The same rules should be applied to tenanted properties. Whilst the UK is subject to a Housing Crisis it is important to remember that every person needs a roof over their head. The finances of those people in need of accommodation dictates where they can afford to live. The solution to preventing over crowding and leaving people with no choice, other than to suffer in poor quality housing, is a simple one; provide them with affordable choices. The only reasons that people live in poor conditions is lack of choice and affordability. The cause of the problems associated with overcrowding, sub-standard and unsafe accommodation are quite obviously due to lack of choice. The solution to the problem is to increase supply of property, i.e. BUILD MORE!

8) Homeowners are not required to verify the legal rights to live in the UK of guests invited into their homes. Quite rightly, they leave this to the border agencies. The same should apply to landlords.

Every year that passes whereby Government allow new property development figures to fall behind the need for new housing should be considered a failure on the part of the Government. The blame for such failures should most certainly not be pointed back at society, or any section of it. Constant vilification of landlords is not addressing the true cause of the Housing problem, which is quite clearly the responsibility of Government . The only real power to control immigration and population growth rests with government, as does the development of additional housing.

I do not blame the current Government for the state of the Housing Market, only time will tell whether it is successful in solving the problem. The reason I voted for you, and the Conservative Party, is that I believe you provide the best hope of being able to solve the issues associated with the Housing Crisis and the economy. I have not judged you on the failures of all governments in the last three decades, I expect better of you.

Given that successive Governments have become so reliant on the Private Rented Sector I think the suggestions I have made above are fair. I sincerely hope you will agree and that you will also consider the following:-

1) It has become a lifestyle choice for several people not to own their own property, they prefer the flexibility associated with renting

2) Many people are reliant upon the PRS for work mobility reasons

3) A significant section of society are unable to obtain mortgage finance required to purchase their own home. This is due to being on low wages, in need of benefits so as not to be living below the poverty line or having a poor credit rating.

4) Government have stated they wish to reward hard working people by helping them to make provisions for their own future. Buy to let can be an effective strategy if it is not taxed and regulated into oblivion.

5) Government clearly acknowledge the UK has a ‘Housing Crisis’

My conclusion is that if Government are to be true to their word they must consider a root and branch overhaul of UK Housing and associated legislation and taxation policies.

Yours sincerely

 

Mark Alexander

Related Open Letters >>> http://www.property118.com/category/open-letter-to-mp/



Comments

by Trendo

16:13 PM, 10th September 2015, About 6 years ago

Reply to the comment left by "Barry White" at "10/09/2015 - 15:42":

Barry - what makes you think that the proposed tax measures are going to move ANY of these properties from the PRS to OO, have you not considered that many LL are rubbing their their hands together with more glee than the HPC crew can dream of ever having, as they are looking for bargain stock to fill up their newly formed Ltd companies ? Institutional BTL is never going to be interested in portfolios of victorian tces dotted around major cities, nor in odd new build flats not located in one place. The experienced and seasoned ex individual LL , re born as company owners wil be extremely interested in them tho.

I do not see how this can achieve anything more than a tax grab and a possible short lived small market lull at best...as you point out we have 4 years to reorganise and restructure, many LL will be far better off after restructuring and if nothing else, this has focussed many LL on what they are doing now as well as carefully considering what their next move will be.

LL are generally very resourceful and entrepreneurial people - they are the least likely bunch of people to roll over and die !?

by Mark Shine

21:02 PM, 10th September 2015, About 6 years ago

Reply to the comment left by "Trendo " at "10/09/2015 - 16:13":

Yes Trendo I agree. The HPC guys can’t have it both ways. On the one hand they vehemently argue that the govt is likely to ensure that tenants’ rights to existing accommodation are protected as much as poss in the chaos the govt has chosen to create. If so: (1) the vast majority of any forced non incorporated LL sales will simply shift FROM (a) non-incorp LL…. possibly VIA (b) lender (temporary LL)…. TO (c) incorporated LLs. If that doesn’t happen then (2) there will be evictions, homelessness, chaos.

Until the budget speech the HPCers always called the Chancellor ‘Gidiot’. Now they mistakenly think he’s their best bud.

Whatever happens, chaos will ensue. Particularly in high demand / low yielding areas such as London or Edinburgh. And the govts institutional LL billionaire buddies (the *beds in sheds/ call centre* types) looking to capitalise on the shortage of rental accommodation are supposed to be the ones to sort everything out... apparently.

by Barry White

21:59 PM, 10th September 2015, About 6 years ago

Reply to the comment left by "Danny H" at "10/09/2015 - 13:45":

Danny, imagine for a moment that the government acquiesce and allow basic rate tax relief on actual profit for individual landlords. If I were thinking about becoming a landlord and tax was my only consideration would you suggest that I, as a higher-rate tax payer, do it as an individual landlord or incorporate? And why?

by Mark Shine

22:59 PM, 10th September 2015, About 6 years ago

Reply to the comment left by "Barry White" at "10/09/2015 - 21:59":

Barry, in the first sentence in your above post, are you genuinely suggesting that HMT might consider genuinely 'levelling the playing field'? If so, yes please!

by Barry White

0:38 AM, 11th September 2015, About 6 years ago

Reply to the comment left by "Mark Shine" at "10/09/2015 - 22:59":

No, I was hoping to use it as an example of how one group of market participants (incorporated landlords) could have a tax advantage over another group of market participants (individual landlords), the tax advantage of course coming from the amount of tax relief each group was entitled to. Of course, this comparison could only be made if tax relief is offset against profit, and not revenues, hence my thought experiment regarding the government acquiescing.

Would it be considered fair that incorporated landlords could theoretically outbid higher-rate individual landlords due to this tax advantage? Would it be fair that basic-rate individual landlords (who could effectively offset 100% of their interest costs) could theoretically outbid higher-rate individual landlords (who could effectively only offset 50% or so of their interest costs) ?

by Mark Alexander

7:42 AM, 11th September 2015, About 6 years ago

Reply to the comment left by "Barry White" at "11/09/2015 - 00:38":

Now that's a loaded question if ever I saw one.

Let's change the type of landlord to pub landlord shall we? Both have big mortgages.

Is it fair the one who is a company pay less tax so can sell his beer cheaper?
.

by Mark Shine

12:44 PM, 11th September 2015, About 6 years ago

Mark / Barry – on the face of it, unless I’m getting the wrong end of the stick… despite starting his reply to my post with the word ‘No’, it does appear that Barry is highlighting the very different treatment that I and my incorporated hypothetical twin brother would receive? For a number of reasons I understand why the two identical businesses are treated (a little) differently, but to cripple one of us while handing the other a bonus is crazy.

BTW when I wrote ‘beds in sheds’ in an above post I didn’t literally mean it would be garden sheds that the institutions would build. That said if the institutional LLs do want to provide or effectively 'buy' large low cost housing in an attempt to help tackle the housing shortage then they should go for it. But simultaneously taxing non incorp LLs out of their businesses whilst reducing corporation tax for other LLs seems a little hypocritical to me.

by Barry White

12:46 PM, 11th September 2015, About 6 years ago

Reply to the comment left by "Mark Alexander" at "11/09/2015 - 07:42":

It was designed to be a loaded question, but I believe goes to the heart of Osborne's statement regarding levelling the playing field between people looking to occupy and people looking to let. The question above uses Osborne's fairness narrative, but with different market participants.

I don't necessarily disagree with anything Danny H said regarding the existing homeowners and existing landlords, but I don't believe that is Osborne's how Osborne's stated aim should be interpreted. I believe he is referring to advantages conferred by the tax system at the point of purchase (basically more tax advantage enables higher leverage), and failing to consider this interpretation in your campaign (and addressing it in a public friendly way) could be a mistake.

Further, with regards your pub landlord question, it is unfair if Georgie Boy says it is, and it's up to the pub owner that pays less tax to prove to Osborne that he's wrong. This would be done by the pub owner examining precisely why Osborne thinks it is unfair to be able to target the argument precisely and stay on point. If Osborne's words are ambiguous, then an argument for every interpretation needs to be considered.......

by Kathy Evans

21:09 PM, 11th September 2015, About 6 years ago

Reply to the comment left by "Barry White" at "11/09/2015 - 12:46":

At the point of purchase, home buyers can get 75% mortgage plus 20% help to buy loan - more than a BTL buyer would hope to get - I've just had a flyer through my door from a developer advertising it.

by Barry White

22:32 PM, 11th September 2015, About 6 years ago

Reply to the comment left by "Kathy Evans" at "11/09/2015 - 21:09":

I agree, *some* homebuyers can get a 75% mortgage plus a 20% help to buy loan, of which capital and interest all has to be repaid out of post-tax money. I won't go into the fact that it has to be on a repayment basis to satisfy MMR and HTB criteria.

On the other hand, *some* buy-to-letters can get 75% mortgages (on an interest only basis) and withdraw unearned equity on existing rental properties to use as a deposit. The equity withdrawal used as a deposit is effectively pre-tax money (and I guess that tax relief is available on the interest too) and there is tax relief available for the full amount of the interest payment on the mortgage. Or such appears to be the sub-text of Osborne's budget narrative.....


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