A former Conservative shadow chief secretary to the Treasury, Lord Flight, has criticised his own party’s recent buy-to-let tax changes, warning that they could further exacerbate the housing crisis, and that landlords should be offered tax incentives.
Ever since Margaret Thatcher declared her belief in a property-owning democracy and introduced the Right to Buy scheme in 1980, the UK has moved into a country that sees houses as something to make money from, not just to live in, which has fuelled the growth of the buy-to-let sector.
But, instead of treating the private rental sector as part of the problem, Lord Flight is urging the Government to “recognise the important part it must play in solving the housing crisis”.
Having long provided substantial, double-digit returns for investors, the buy-to-let market has outperformed all major asset classes in recent years.
However, Lord Flight fears that the Government’s decision to introduce a number of measures to curb the growth of buy-to-let investment will lead to a mass exodus of landlords, which would reduce the supply of much-needed homes in the private rental sector.
In an article published on the Conservative Home website, Lord Flight said that tax changes, including the reduction in mortgage interest tax relief, will inevitably push rent prices higher.
He wrote: “The biggest domestic issue of our times is the high cost of housing in the UK, both pricing the younger generation out of homeownership and driving up rental costs.
“Yet, since 2015, the private rental market has faced an onslaught of tax hikes, restricting mortgage interest relief to the basic rate of Income Tax, putting a premium Stamp Duty levy on the purchase of new homes to rent, not extending the 20% rate of Capital Gains Tax (CGT) to residential property, and taxing a landlord’s turnover rather than profit, unlike any other business sector.
“The rationale for this assault on largely individual landlords was to shrink the private rented sector and so expect to increase the supply of homes available for potential homeowners. It is, however, a nonsense to blame private landlords for the housing crisis – rather, the large increase in private rented properties over the last decade has alleviated the shortage of residential accommodation.”
He insisted that a “strong and growing private rental market, alongside a growing homeowner sector,” is necessary for a healthy UK housing market.
The politician added that, due to the importance of the buy-to-let sector, it is concerning that, according to research by the Residential Landlords Association (RLA), 69% of landlords are not making further investment in rental properties, “largely as a result of the punitive Stamp Duty levy they now face”.
To help encourage investment in the buy-to-let sector, Lord Flight would like to see the Government scrap the Stamp Duty surcharge and introduce “tax incentives for landlords prepared to offer longer-term tenancies”, insisting that it is “somewhat illogical for the tax system, as it currently does, to make it more attractive for a landlord to switch properties to short-term holiday lets than to continue providing homes for long-term rental”.
He also wants ministers to consider providing landlords with CGT relief when they sell their property to a sitting tenant, who becomes a homeowner as a result.
“It is time that the Conservative Party went back to Nigel Lawson’s more positive housing policies towards the private rented sector,” he concluded.
Do you agree with Lord Flight’s suggestions?
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