There’s no denying that former chancellor, George Osborne affected the buy-to-let sector enormously when he implemented a 3% stamp duty surcharge for additional properties back in 2015.
This reform phased out mortgage interest tax relief, leading to landlords across the UK being forced to sell their properties or raise rent in order to compensate for the new surcharge, creating a knock-on effect for tenants.
However, current chancellor of the Exchequer, Philip Hammond, said that he will not be reversing these tax reforms when he announced the 2018 Autumn Budget earlier this week.
Many landlords have reacted to this announcement claiming that they feel the government has, once again, allowed the property market to take a back seat.
James Davis, founder and CEO of online letting’s agency, Upad, feels that the government should recognise that for many, being a landlord is a business choice which should, therefore, command the same respect as any other mainstream business area.
Landlords are definitely needed, especially with the housing crisis in the UK not set to improve any time soon. Therefore, many of them feel that the government has a duty to keep their businesses safe.
Hammond’s Budget statement did claim that lettings relief would be put in place for any landlords who share occupancy with their tenants. This, however, is only a small number of those with buy-to-let properties and won’t actually make much of a difference to the vast majority of landlords. Many actually feel like it is yet another tax hit, rather than seeing it as a positive move forward.
CEO of PayProp UK, Neil Cobbold, expressed surprised that the government did not announce a more stringent clampdown on short-term lets. Whilst they do provide a great boost to the economy, short-term lets will affect the fortunes of the wider lettings sector. He feels, therefore, that now is the time for initial regulation.
“There has to be an equal tax footing for conventional landlords and those looking to let their homes on a short-term basis, and the proposal for limited tax relief on properties where the owner is in shared occupancy with the tenant marks the very first step towards achieving that,” he said.
“Over the next decade, it is likely that the short-term lets market will continue to expand, so it will be interesting to see if the government takes a similar regulatory approach as it has done with standard lets in the private rented sector.”
The government may have missed an opportunity by not providing tax breaks to those landlords who offer long-term tenancies. This would have provided much-needed rental opportunities for those still unable to afford their own home.
Research could have been conducted on this in order to provide the government with vital feedback for their previously mentioned plans to introduce mandatory three-year tenancies. Then a decision could have been made as to whether long-term tenancies should become mandatory or if they should remain an optional decision, rewarded with a tax break.
Another interesting point to note from the Autumn Budget was the lack of information about implementing a Tenant Fees Bill. Hammond first proposed this ban on upfront fees charged to tenants nearly two years ago. He also mentioned a cap on security and holding deposits. None of these were addressed this week and landlords and tenants are still in the dark about when and how it would be implemented.
In short, the latest Budget announcement means that more landlords will continue to leave the market altogether due to the lack of taxation relief. This will then lead to a mass shortage of good quality lettings within an affordable price bracket. The Housing Crisis looks set to continue and may even get worse if PRS remains in a continual state of change.