Shadow Chancellor John McDonnell anti Buy to Let but said very little

Shadow Chancellor John McDonnell anti Buy to Let but said very little

10:38 AM, 29th September 2015, About 7 years ago 44

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During his first speech as Shadow Chancellor John McDonnell hinted at his views on introducing rent controls and stopping tax breaks for Buy to Let landlords without actually giving much away in detail.John Mcdonnell

The Labour party have estimated that tax breaks to Buy to Let investors are worth £13billion per annum and it is understood that if they were to get into power they would be looking for the ability of landlords to offset costs against taxable income to be abolished. Thus sending many property investments into a negative cash flow position.

From the transcript of the speech McDonnell said: “There will be cuts to the billion pound tax breaks given to buy to let landlords for repairing their properties, whether they undertake the repairs or not.”

“And cuts to the housing benefit bill when we build the homes we need and control exorbitant rents.”

What exactly this means for his plans on the taxation of Landlords and the instigation of rent controls in the Private Rented Sector has been left wide open.

Mr McDonnell also criticised the Bank of England for missing the inflationary target of 2%. He indicated that although  the Bank of England would be kept independent from politically lead decisions he would be looking for a much wider economic objectives than just inflation.

McDonnell said: “I will also be setting up a review of the Bank of England.

Let me be clear that we will guarantee the independence of the Bank of England.

It is time though to open a debate on the Bank’s mandate that was set by Parliament 18 years ago.

The mandate focuses on inflation, and even there the Bank regularly fails to meet its target.

We will launch a debate on expanding that mandate to include new objectives for its Monetary Policy Committee including growth, employment and earnings.”

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David Lawrenson

12:10 PM, 29th September 2015, About 7 years ago

Maybe he might take the time to listen to the boyos across the bridge where the penny seems to have dropped.....
In February this year, the Minister for Communities and Tackling Poverty, Lesley Griffiths AM told the Welsh Assembly:

“I do recognise that rent control can look attractive initially, but I think previous experience shows that rent controls reduce the incentive for landlords to invest and can then lead to a reduction in quality housing. Those properties that are still subject to rent control under the Rent Act 1977 are often of the poorest quality, so I think such a proposal would require very careful consideration. Again, I think that could give possible unintended consequences to the supply of private rented properties.”

Thanks to RLA for their timely reminder of this quote...!

money manager

12:26 PM, 29th September 2015, About 7 years ago

French city centres are a good example of rent controls, a diversified population but widely dilapidated stock; sheer insanity.

David Lawrenson

12:41 PM, 29th September 2015, About 7 years ago

Reply to the comment left by "money manager" at "29/09/2015 - 12:26":

True, and when you look under the surface of the places where rent controls are supposed to have worked, the real story is a very different picture.........In New York there used to be these bizarre interview rituals.... you had to go to the right school to get an apartment in certain blocks or even be of the right religion.

Other places held up as great examples are Stockholm... also Prague... in fact rent control has been a disaster in both.

Laura Delow

14:17 PM, 29th September 2015, About 7 years ago

Although many believe Jeremy Corbyn doesn't stand a chance of winning at the next election (assuming he's still party leader), what is worrying is the number of young voters (many of whom never bothered to vote in previous elections) who will vote next time around and as a result, this dangerous animal may have a chance of winning. Just because we believe he's a communist nutter, doesn't mean to say that the rest of the electorate feels the same, especially if they feel the Tory's are only looking after the well healed, irrespective of whether this is true or not. Many a voter is envious of those who have worked & saved hard & sacrificed much to build a property portfolio or a large pension fund or other form of savings. JC is saying to the less well off what they want to hear just like Stalin did in the early 1900's. Even if JC's reign is short, there are a number of party members who agree with him & it's only a matter of time before Labour gain control of UKPlc again & crucify the private rental property sector by whatever means possible eg a tenants right to buy at a discount from a private landlord or no tax break on mortgage interest at all or an onerous Investment Income Surcharge tax reintroduced (previously 15% in the 70's under Labour) which would also effect all investment income whatever its source, or to abolish tax relief on repairs etc etc the list goes on. Even the Tory's have started to chip away (in a big way) at the private landlord sector having introduced in the last Budget to abolish the 10% Wear & Tear Allowance & restrict Buy to Let Mortgage interest relief to the equivalent of 20% (being weaned in from 2017). It is dangerous to ignore the warning signs. Many landlords are proving they're apathetic having still not signed the e-petition regarding the restriction on mortgage interest (this doesn't affect me personally as my portfolio is fortunately unencumbered but it indicates the way the wind is blowing if the Tory's can stoop so low to introduce this). In a nutshell I think there's a bigger problem looming as all the indicators point to private landlords being a major target (no matter which party is in power). If we collectively don't get more aggressive in a pro-active way, we are in serious danger of being on a back foot & being annihilated & becoming extinct or at worst, making us so angry that some more desperate or less scrupulous landlords will resort to Peter Rachman & Nicholas van Hoogstraten methods (don't forget the old adage of desperate people do desperate things). I personally will be looking at ways to extricate myself from what I can only foresee as a very miserable future. This is not because I am scare mongering as I abhor this negative trait in others. It is purely & simply a fact of life I think we face in that UKPlc needs to get more revenue in (and this will only worsen over the next few years) & landlords will be an easy target as they are perceived as a rich seam to exploit (property being a key factor in UKPlc) no matter how much us Landlords sacrificed financially, emotionally & time wise to claw our way there. To ignore what "might" lay ahead and to blindly believe none of the above can possibly happen, is foolish. Who foresaw the recent budget announcements - from a Tory Government? I doubt none of us. Does anyone have an idea how we Landlords can collectively get ahead of the curve on this & control (not just influence like the National Landlords Assoc & other similar bodies do) our futures no matter what party is in power, rather than wait for further things to happen to us & our only (re)action is that we end up signing yet another e-petition after another?

Saeef Khan

14:42 PM, 29th September 2015, About 7 years ago

Reply to the comment left by "Laura Delow" at "29/09/2015 - 14:17":

I agree with every word you have stated! I think many landlords are sitting in comfort zone under false pretences that it won't happen to them.

They won't realise until they have been bitten.

Best time to fix the roof is whilst sun is shining. So in other words it might be good time to sell up whilst market and taxes are good.

Teg's Dad

15:00 PM, 29th September 2015, About 7 years ago

If Labour ever look like getting in, then my immediate response will be issuing Section 21s to all tenants, with an explanatory letter stating that their policies will make renting out that property non-viable, but if they don't get in, then the Section 21 will not be acted upon.

David Lawrenson

15:22 PM, 29th September 2015, About 7 years ago

I hope more sensible voices in Labour may rein in John n Jeremy should they ever assume power.

I would not discount the appeal of J n J though... I could never understand why Ed n pals did not more robustly attack multinational tax dodging in the way the current leaders are. (Seems to have real resonance with a large chunk of UK society, even though hard to pull off in practice).

Re rent control, the likes of the Rachman type of criminal-posing-as-landlord will be seeing an opportunity if this ever came to pass. Hope Diane and Jeremy might, before then, read the history lessons from the 60s and the last time rent control was tried..

Ian Narbeth

16:56 PM, 29th September 2015, About 7 years ago

At the moment I am more worried about the Boy George (Osborne) than Comrade Corbyn. Never mind about 15% surcharges or 98% tax rates under Labour in the 1960s, Osborne's proposals can mean paying tax even though a loss is made, an effective tax rate of infinity percent. Either he doesn't know (in which case he is incompetent) or he doesn't care (in which case he is callous). Be afraid of Mr Infinity, be very afraid!

Equals People

17:43 PM, 29th September 2015, About 7 years ago

Reply to the comment left by "Teg's Dad" at "29/09/2015 - 15:00":

People like you are the exact reason why I'll be voting labour in. If you do choose to take the route of sending tenants letters containing: a threat but also what could be construed as pressure/blackmail to vote in a certain way in the next election, be prepared for the consequences.

Laura Delow

18:01 PM, 29th September 2015, About 7 years ago

So far today it seems only 8 Landlords who are members of Property118 are concerned enough to comment on the seemingly unfair targeting of Landlords by the Tory's to raise extra revenue, let alone the possible future threat of being targeted by a Labour Government or worse still a Socialist Labour Government. If Landlords cannot collectively work together to fight against these marauders, then what chance do we have? LET ME BE CLEAR - in the UK there are approx 1.4m private landlords yet only 30,975 have signed the e-petition to reverse the planned tax relief restriction on individual landlords. How sad is that?!? Are the other 1,369,025 UK landlords in favour of this planned Bill? That is the message the Petitions Committee have been sent! We MUST MUST MUST first & foremost find a way to change the apathy of the landlord market (if we can't influence a fellow like minded landlord, what chance do we have with influencing a Government?). I beseech you - how do we successfully co-ordinate & engage our own sorry rabble of fellow landlords to help i) with overturning this Bill & then ii) to stave off future attacks on the private landlord sector. If you don't believe how damaging we landlords are to ourselves, just read below the response to our e-petition by The Petitions Committee who made its first decision relating to our petition on 8th Sept with the Treasury's response as follows:-

The Government is committed to a fair tax system so is restricting tax relief landlords can claim on property finance costs to the basic rate of income tax.

Landlords are currently able to offset their mortgage interest and other finance costs against their property income, reducing their tax liability. This relief is not available for ordinary homebuyers and not available to those investing in other assets such as shares. Currently the landlords with the largest incomes benefit the most, receiving relief at their marginal tax rates of 40% or 45%.

By restricting finance cost relief available to the basic rate of income tax (20%) all finance costs incurred by individual landlords will be treated the same by the tax system. This recognises the benefits to the economy that investment in property can bring but ensures the landlords with the largest incomes will no longer benefit from higher rates of tax relief.

By unifying the treatment of finance costs for all individual landlords, the Government is reducing the distortion between property investment and investment in other assets, and reducing the advantage landlords may have in the property market over ordinary homebuyers.

Less than 1 in 5 (18%) of individual landlords are expected to pay more tax as a result of this measure. Taking account of the other measures from the Summer Budget, the Office of Budget Responsibility (OBR) have not adjusted their forecast for house prices. The OBR expect the impact on the housing market will be small. Furthermore, this change is being introduced gradually from April 2017 over 4 years. This will give landlords time to plan for and adjust to these changes.

HM Treasury


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