Shelter’s Position on the Tenant Tax

by BTL INVESTOR SCOTLAND

10:59 AM, 6th October 2016
About 2 years ago

Shelter’s Position on the Tenant Tax

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Shelter’s Position on the Tenant Tax

I have become increasingly frustrated at Shelter’s position on the Tenant Tax so have decided to write the following letter to Campbell Robb, Shelter’s Chief Executive.frustration

Dear Campbell,

I am having some difficulty understanding why Shelter has not come out against the Government’s plans to restrict finance cost relief for non-incorporated landlords.

As you will know, this tax change is being phased in from 2017/18 and will be fully in force by 2020/21.

I have tried to understand your position by reviewing the information on Shelter’s website.

Your website states that Shelter’s core beliefs are that everyone should have a safe, secure and affordable home.

You say that you strive every day to give people the help they need, and campaign relentlessly to achieve your vision of a home for everyone.

Your website says that safe is about being in a supportive community, free from harassment from rogue landlords, and living somewhere your children aren’t at risk from damp or bad wiring. It’s knowing that if something happens which means you might lose your home, there’s a safety net to catch you.

I agree entirely with these aims.

However, I do have concerns that the Government’s tax change will have a significant financial impact on many landlords. In some cases, landlords will be expected to pay tax bills which exceed their actual profit. In cases like this, how will landlords be able to afford to maintain their properties and keep tenants safe? Surely, there is a risk that the condition of private rented sector homes will deteriorate as a result of landlords being in financial hardship?

Your website goes on to state that security is about having a long-term tenancy so you can plan ahead for more than a few months, and feeling able to raise issues without the threat of eviction. It’s knowing there’s appropriate, reliable support there for you and your family if you lose your home.

Again, I have every sympathy with these aims.

However, I fear that the Government’s tax change for non-incorporated landlords will result in thousands of existing tenants being evicted as landlords will be forced to sell up as their businesses will no longer be viable. In some cases, landlords will ask tenants on benefits to leave in order to move in new tenants who can afford to pay higher rents. I cannot understand how the tax change will improve tenant security.

Your website states that affordable is about making sure enough homes are built, so everyone in our society can buy or rent a home and still have something left to live on. It’s also about the prices of homes to buy, and private and social homes to rent are in touch with what people earn. They should leave no one behind. It’s knowing there’s help available for the times when you might struggle to pay your rent or mortgage – helping you through the difficult times we all face.

Once again, I have no issue with Shelter’s aims.

However, I fear that new supply will be restricted as landlords will be discouraged from expanding their portfolios. I also have concerns that landlords will pass on their increased costs and increase rents. There is already evidence that this is happening. You will be aware of the recent RLA survey which showed that two thirds of landlords will be increasing rents as a result of the tax change which restricts finance cost relief.

https://news.rla.org.uk/landlordsraisingrents/

There was no mention of tenants in the Government’s impact assessment on the restriction of finance cost relief. However, now that the implications of the tax change are understood, the tax has become known as The Tenant Tax because it is recognised that landlords will pass on their increased costs to their tenants.

You have probably worked out by now that I am a landlord. I am proud to be a landlord and regard myself as a housing provider. I have purchased new build flats (thus helping to increase supply). I have bought properties which have been repossessed by lenders (thus bringing empty homes back in to use). I have rented to tenants on housing benefit (thus helping to address the shortfall in affordable housing for people who cannot afford to buy).

Since 8 July 2015 when the Government announced the tax changes which restrict finance cost relief, I have stopped adding to housing supply. I have evicted tenants on benefits and increased all my rents. These actions were a direct result of the tax change. I take no satisfaction from my actions. These were decisions I simply had to take to protect the viability of my rental business. Thousands of other landlords are making similar decisions all over the UK to protect their businesses.

Can you please explain to me why Shelter does not oppose this tax change? Do you think the tax change will help Shelter achieve its aims?

I look forward to hearing from you.



Comments

Ian Narbeth

11:22 AM, 6th October 2016
About 2 years ago

Well put but don't hold your breath expecting a positive reply. It is political suicide for leftist politicians and organisations to be seen to support landlords.

Hazel de Kloe

19:33 PM, 6th October 2016
About 2 years ago

An obvious problem well-explained. Trying to get an opposing side to see the other perspective will no doubt continue to be tricky, particularly when there is little true understanding of the landlord dilemmas this situation creates. Keep us posted with any reply!

Simon Williams

21:09 PM, 6th October 2016
About 2 years ago

Nice letter. Like that you said you are proud to be a landlord. We should all say that more often.

Shelter of course, has done more than any other organisation to accentuate the negative when it comes to our sector with their dubious "research". Recently, they asked a small sample of tenants whether their landlord had ever broken the tenancy agreement. Apparently quite a few said yes. Shelter used the response rate to thus conclude, and trumpet the headline, that "1 million" tenants have been the victim of landlords breaking the law in the last year. The extrapolation from a small sample is dubious, but it's also highly dubious to assume that a tenant's view of when a landlord is breaking the law is to be accepted without question.

Apparently, 60% of the tenants' reports of law breaking concerned landlords entering a home without permission or notice. The last tenant to accuse me of breaking the tenancy agreement, had indeed complained that I entered his room without seeking permission. He was right - because there was water pouring from the ceiling of the room below! He'd left the washbasin running! I pointed out that in an emergency I was perfectly entitled to enter without permission. No doubt, had that tenant been interviewed by Shelter he'd have said "Yes" - my landlord did break the law and that would have ended up in the dodgy 1 million statistic.

Ian Narbeth

10:27 AM, 7th October 2016
About 2 years ago

Simon, your point is well made. Shelter conflates an alleged contractual breach with the pejorative "breaking the law" to make it sound sensational. If every time a tenant paid rent late (a breach of contract) or failed to report damage in accordance with his tenancy was called "breaking the law" it would be obvious to Shelter that millions of tenants were breaking the law every year. Will they publish this story?

dom glynn

15:18 PM, 7th October 2016
About 2 years ago

Hi BTL I S,
I got into a discussion with Shelter on Facebook regarding S24.
This is their position.
http://blog.shelter.org.uk/2016/09/debate-around-buy-to-let-tax-changes-points-to-general-need-for-extra-safeguards-for-tenants/
No doubt the above link will be their response to you if anything.

Rob Crawford

18:19 PM, 7th October 2016
About 2 years ago

I suspect Shelter's response will be that the threat of increase rents justifies the need for "rent capping"!

Simon Williams

21:07 PM, 7th October 2016
About 2 years ago

Reply to the comment left by "Ian Narbeth" at "07/10/2016 - 10:27":

Indeed. One suspects that the Shelter survey of landlords being quizzed about tenants' breaches will be a very long time coming.

I also notice the Shelter survey asked tenants whether the landlord had ever "threatened or harassed" them. No doubt that includes defaulting tenants who have been "threatened" that continued non-payment of rent might lead to their eviction.

BTL INVESTOR SCOTLAND

12:31 PM, 10th October 2016
About 2 years ago

Response received this morning:

Thank you for your email to Campbell, please see the further detail in our policy blog in answer to your question : http://blog.shelter.org.uk/2016/09/debate-around-buy-to-let-tax-changes-points-to-general-need-for-extra-safeguards-for-tenants/

Hazel de Kloe

15:17 PM, 10th October 2016
About 2 years ago

What a cop out...! Obviously not willing to enter into any REAL debate on the subject, it seems...

BTL INVESTOR SCOTLAND

19:24 PM, 10th October 2016
About 2 years ago

I have responded to Shelter as follows:

Louisa,

Thank you for your response.

I note that Shelter has carried out research on the impact of section 24.

Can you please confirm if your research has established how many properties are owned by the landlords who will be affected by section 24? This information would help clarify how many tenants are at risk of eviction and/or rent rises.

Shelter give two reasons for supporting section 24:

Firstly, you say that the tax change might dampen the risk of a bubble building up in buy-to-let. This statement is vague. Can you please explain what this statement means and what your specific concerns are so that I can understand Shelter’s position.

Secondly, you say that the money could, if the government chooses, be used to undo the damaging freeze on Local Housing Allowance rates. Does Shelter have any evidence that the Government is considering using the extra tax revenue in this way?

I look forward to hearing from you.

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