Treasury response to Section 24 report by Dr Rosalind Beck

Treasury response to Section 24 report by Dr Rosalind Beck

15:34 PM, 17th November 2016, About 5 years ago 138

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Below is the response from HM Treasury to the comprehensive report written by Dr Rosalind Beck on Section 24 of the Finance (No. 2) Act 2015 “the unjust legislation that will make the UK housing crisis much worse.”HM Treasury

Click Here to Download the full report by Dr Beck

Please leave any (polite) comments you would like the Treasury to take on board and we will inform the HM Treasury that real landlords’ views of Section 24 can be found here.

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Comments

by Dr Rosalind Beck

9:05 AM, 19th November 2016, About 5 years ago

Reply to the comment left by "Steve Wood" at "18/11/2016 - 23:45":

Thanks, Steve. At the moment, on a personal level, and having already increased rents a bit last November and intending to do the same in April to mark the new, lunatic tax regime, I am marginally better off because of s24 as it hasn't come in yet. It therefore truly is the tenants who are being affected. But I remember when I paid interest rates of 5 to 6% and of course although this is not likely soon, it is obviously possible at some point and I have to build a war chest for potentially infinite tax rates.

For me it is the how an increase in finance costs leads to higher rather than lower effective tax rates that is so disgusting and ridiculous. For others the effect will be very dramatic immediately; for me there would need to be an increase in the base rate by about 3% to tip me into a loss. The more I increase my rents in the meantime, the better protected I will be.

I do believe it is inevitable Section 24 will be repealed sooner or later. This is the first letter - and as far as I am aware, the first acknowledgement ever - from the Treasury that they are aware of what happened in Ireland, even though they have misunderstood/are misrepresenting it. So our persistence is paying off by them at least being better educated. I do think it must be hugely embarrassing for the Treasury and HMRC staff to have to defend the indefensible - but it is their job...

by Pete David

9:17 AM, 19th November 2016, About 5 years ago

Just to chime in, our rents need to rise by £40,000 by 2021, for our portfolio to remain as it is. That's for 14 houses so it's going to be a truly dreadful time for tenants. They'll have to get two jobs per person and cut right back to the very barest essentials. Or they'll move to somewhere less desirable whilst we convert decent houses into horrible multi occupancy 'pack 'em in tight' properties with much smaller rooms and shared toilets etc. I am surprised at how much disdain the government is showing to tenants here. And the most amazing thing is we are not hearing the slightest peep from ANY tenancy associations or indeed local councils. Are they truly not aware of what is coming their way ? Do they honestly not have the slightest idea?

by Jonathan Clarke

9:59 AM, 19th November 2016, About 5 years ago

Reply to the comment left by "Peter David" at "19/11/2016 - 09:17":

I have several East European tenants. By and large they have a great work ethic and often have two jobs already to make ends meet . I had my first one take 3 jobs recently to pay the rent increases forced on me because of this ugly Sec 24.

With winter fast approaching heating bills will rise and their budget will be severely stretched again. The children suffer because their Dad never gets to see them as he is always working. If not working he is sleeping. There is simply no healthy work/life balance for so many families.

I met one tenant at lunchtime the other day for a maintenance matter . He hadn't slept in 24hrs. He stumbled whilst holding his 7 mth old baby through sheer exhaustion. Luckily he recovered his stride and the baby was unharmed but the outcome could have been very different.

This tenant tax is far reaching and cruel in its knock on effects.

by Steve Wood

10:04 AM, 19th November 2016, About 5 years ago

Probably get rent rise caps next. That's the extent they listen. Sorry love, got nowhere for you too put you...not why I went into politics to tell homeless families that! Was that what the council chap said the other night on th BBC. Cold winter ahead. Collateral damage to help FTB. What only if home building was made easier, a priority and supported by HMG. More people than houses may be the in escapable truth. But the system has failed. Wake up HMG. Listen to these people. Stop deflecting the blame. U turn u turn u turn. When I mess up I say so. If I knew I what you now know, I'd act quick.

by Steve Wood

10:10 AM, 19th November 2016, About 5 years ago

He may not have said'love'!

by Pete David

10:12 AM, 19th November 2016, About 5 years ago

We need to raise this issue with local councils and tenancy associations. This is "Cathy come home" all over again.

by Sunita Rickman

10:16 AM, 19th November 2016, About 5 years ago

Reply to the comment left by "Peter David" at "19/11/2016 - 09:17":

Say a News section yesterday - about Scotland - they're already bringing in a Law whereby Landlords will not be able to evict tenants - unless they are selling their property???? showed disgusting buildings with damp & ceilings falling in & as usual blamed the Landlords.

by Adam Lawrence

10:20 AM, 19th November 2016, About 5 years ago

Fellow landlords. We need to WAKE up.

This is by far the best response that makes the most sense from any public official/office so far. There are a number of excellent facts in there. Certain dross and noise needs to be REMOVED from this debate and we need to stop crying into our beer.

1) drop the claims of unfairness with corporate structures. As correctly stated the new dividend taxes introduced at the same time mean there's a limited (but non zero) benefit to using company structures. Not enough to get this tax repealed. Drop it.

2) the comparisons with Ireland are not like for like as indicated. Point them out as a potential red flag, but as they were indeed more extreme, don't make more of them than this. People are going around shouting about how it will be "the same as ireland". It won't. It may well be similar but it waters down the real arguments we have.

These are two of the many arguments that are adding noise and clouding the issue.

The bottom line rather than worrying about our own tax bills is that we MUST make the government focus on the INCIDENCE of the tax. I'd suggest giving them a quick economics lesson in price elasticity.

E.g. it's widely known that as petrol prices rise, demand falls very slowly I. E. Petrol is INELASTIC. There are very few substitutes that are workable (public transport, bike, walking) for the majority.

As the price of a good or service with lots of substitutes goes up, conversely, the price of it is much more ELASTIC. One example could be dulux paint.....if it raises prices significantly we can substitute Johnstones for example (ceteris paribus).

How ELASTIC do you think demand is for rental property? More like petrol than dulux paint in my opinion. What are the substitutes for a private rented property?

For a single person or some couples without kids - HMO. A growing sector.

For a family - social housing if available - a sector that is riddled with problems, chronic undersupply and no plans whatsoever to rectify this.

Share a property with others/sublet. A growing sector which involves taking quite a bit of risk.

Move back in with mum and dad - or don't move out. A growing sector!

In comparison, it seems like the alternatives are less workable than the petrol alternatives, let alone the dulux paint ones.

BASIC economics and the fundamentals of business tell us that if the price of your "supply" of a good or service goes up, whether that be exchange rate, tax, or inflation, the supplier will pass on a percentage of the higher cost to the end user.

In the paint example, with elastic price elasticity, the supplier takes the majority of the incidence on the chin and passes on a small amount.

In the petrol example, almost all of the incidence is passed on to the consumer, us at the pumps.

In the housing example, the amount passed on will depend on the elasticity of private rented accommodation. My suggestion is that it is HIGHLY INELASTIC.....over to HM Treasury to rebut that theory. I look forward to the response - sadly I'm 100% certain that if they press ahead with s24 that the outcome will be extreme rent rises.

Unite - be clear - cut the weak arguments and the noise - use something grounded in both theory AND observable fact, from millions of examples in the past. Price elasticity!!!

by Jonathan Clarke

11:35 AM, 19th November 2016, About 5 years ago

Reply to the comment left by "Adam Lawrence" at "19/11/2016 - 10:20":

I think housing is pretty elastic and has some give in it yet before it snaps . The % of people who sleep rough on our streets is proportionally very very small. The majority find somewhere to put their head down. Existing brick built structures in pure physical terms compared with heads of population can absorb the excess albeit the distribution would be unsavory for a whole host of reasons.

For example none of my adult children live with me but if push came to shove they could. I deal in the LHA market and get dozens of enquiries from people who are sharing with family / friends. Attics and conservatories and sheds and garages are adapted and converted to make room for them. Its unhealthy but its in the dry. Overcrowding is a very subjective term.

These people though when they call me up I call the Homeless within a Home. They relate to that phrase. The figures on these I have yet to see and I doubt anyone knows. My gut says that the elastic take up has still some way to go before people spill onto the street in great numbers.These people are largely hidden from view but it will get much worse. Councils foyers will be the barometer. Add to that police station foyers and hospital A&E departments. Town halls and emergency shelters used for when we have natural disasters will take up some of the slack stretching the elastic still further . Then we have tents and converted container units like the Calais jungle etc etc .

This is because they will run out of B&B and Travel lodges at some point. Its inevitable I think that they will then turn to us to provide emergency accommodation for the very people we are evicting and then pay us an enhanced rate over and above the market rate to do this thus paying for our Sec 24 bill . The DHP pot will receive a massive boost,

So the elastic may never snap but just get pulled distorted and used and abused to fit around the problem.
The poor tenants will be used like slingshot as the elastic attached to the catapult of life bounces them around all over the place.

by Michael Barnes

11:50 AM, 19th November 2016, About 5 years ago

Reply to the comment left by "Adam Lawrence" at "19/11/2016 - 10:20":

A reasonable argument.

I suggest that you send it to Treasury and post the response back on this site.


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