Tax Changes aren’t Working but are Hurting Tenants, Warns RLA

Tax changes for buy-to-let landlords aren’t achieving their stated objective, but are hurting tenants, the Residential Landlords Association (RLA) has warned.

The warning arrives following the publication of research by the Local Government Association (LGA), which shows that the average private rent across the country is now £852 per month.

Tax Changes aren't Working but are Hurting Tenants, Warns RLA

Tax Changes aren’t Working but are Hurting Tenants, Warns RLA

While this figure is a mean average, rather than the more accurate median rent of £675 per month produced by the Valuation Office Agency, it is more heavily skewed by much higher rents in London, says the RLA.

However, the organisation notes that this figure is a reflection of the supply crisis in rental housing. This is further demonstrated by sharp declines in buy-to-let mortgage applications.

According to the RLA, the situation is likely to only get worse, as landlords feel the squeeze of the Government’s restriction on mortgage interest tax relief.

RLA research has found that just 19% of landlords plan to invest in new property over the coming year, with 58% considering reducing investment in their rental properties, due to the effects of recent tax changes on their finances.

Although ministers have sought to boost the number of homes to rent by encouraging institutional investment in the sector, the London School of Economics said last year that individual landlords will remain the dominant players in the market.

The RLA warns that no route can be found to boost the supply of rental homes that the country needs without providing support for the majority of landlords, who are individuals or small firms. It is calling on the Government to scrap its recent tax changes, such as taxing a landlord’s turnover rather than profit, the mortgage interest tax relief restriction, and the 3% Stamp Duty surcharge on homes that add to the supply of rental housing.

The Policy Director of the RLA, David Smith, says: “Today’s research from the LGA shows clearly the problem being caused by the Government’s tax increases in a softening economy.

“Individual landlords are stalling investment in new property as a result of the changes, whilst institutional investors are failing to come forward to provide the homes to rent we need.”

He continues: “The Government argued that the tax changes were about supporting first time buyers. What has happened is that tenants can’t find the homes to rent they need, whilst being unable to afford a home of their own.

“The rental housing tax hikes are simply hurting but not working for anyone. It is time to scrap them.”

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