The Residential Landlords Association (RLA) and the National Landlords Association (NLA) are calling on the new chancellor, Rishi Sunak, to use his Budget speech, which will take place on 11 March, to support investment in the private rented sector, as research shows that buy-to-let landlords are exiting the market in droves.
Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a significant number of landlords selling buy-to-let properties with a view reducing their portfolio, or exiting the market altogether.
Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.
The government’s draconian tax changes have not just pushed a number of BTL landlords out of the PRS, but also left many prospective tenants with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.
Chris Norris, director of policy and practice at the NLA, said: “The tax system with which landlords must contend is no-longer fit for purpose. HM Treasury has constructed a series of barriers to investment, which make running an efficient and successful lettings business borderline impossible.
“As he prepares his first Budget, we hope that the Chancellor will take the opportunity to use taxation to encourage investment in new and existing homes alike. Mr Sunak must recognise that housing costs can only be reduced by making it easier, not harder, to provide good quality rented homes.
“The emphasis must be on finding solutions and encouraging investment across tenures amongst a diverse range of providers.”
The RLA and the NLA are calling for a fundamental review of the way rented housing is taxed to ensure that tax policy supports, rather than contradicts, government objectives.
They propose that the stamp duty levy is dropped where landlords add to the net supply of housing through developing new properties, bringing empty homes back into use, or converting large properties into smaller, more affordable units of accommodation.
They also suggest that tenants are supported into homeownership by introducing a capital gains tax exemption where landlords sell a property to a sitting tenant.
In addition, they call for tax relief where landlords invest in measures to improve the energy efficiency of a rented property or let adapted properties long-term to tenants with accessibility needs.
David Smith, policy director for the RLA, commented: “The tax system for rented housing is failing. It encourages the provision of holiday homes over long-term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.
“For the sake of those living in rented housing or who are looking for accommodation, ministers need to use the Budget to urgently change course to ensure that their tax policies are positively aligned with their wider housing objectives to encourage good landlords to provide long-term affordable housing.”