With the supply of rental properties falling, calls are being made to take a fresh look at the tax burden on buy-to-let investors. The Residential Landlords Association is calling on the government to look at the taxes that landlords pay as the number of properties to let dwindles. The problem will only become more acute if no action is taken. More people are living in privately-rented accommodation. Some simply cannot afford to buy, while others do not want the financial burden of owning property or taking out a mortgage. Older people are downsizing and moving into rental property so they don’t have to deal with property maintenance or repairs. It is predicted that more than 25% of UK households will be renting privately by 2025. However, as demand is increasing, the supply is falling.
ARLA Propertymark figures show that there were 46,000 fewer properties available for private rent in England between March 2016 and this year. This decline coincides with the introduction of 3% stamp duty surcharge on second and subsequent homes. Investors also faced further financial burders such as the phasing out of mortgage interest relief on buy-to-lets. It is no coincisde that 23% of tenants had their rents increased in March. As prime minister Theresa May said, when supply goes up, rents come down. Conversely, rents rise when supply falls. One argument for making life more difficult for landlords was to encourage them to sell up and, therefore, make more properties available for buyers, particularly first-time buyers. However, property prices and the deposit needed to raise a mortgage are still two very large obstacles standing in the way of many people. As a result, they are faced with being unable to find a decent supply of rental accommodation while still being unable to afford to get on to the property ladder.
RLA policy director David Smith said that the RLA figures show the tax increases are having an adverse effect on supply. This, in turn, is making it difficult for renters to find the properties that they need. The association is calling on the government to implement pro-growth taxation which will support buy-to-let landlords to encourage them to invest in much-needed rental properties. While corporate investors are getting a foot into the rental sector, they still only account for about 2% of the private-rental market. More needs to be done to encourage landlords with small portfolios or small businesses to invest further in this sector, too.
The Ministry of Housing has published a plan which pledges to back the delivery of around one million properties by 2020. However, Mr Smith argues that providing new homes for people who can afford to buy them is not a policy that meets the needs of those who cannot afford to buy. There needs to be a shift in the mindset that home ownership is the way forward for the majority of Britons. Instead, there should be greater emphasis on providing decent quality rental accommodations in areas that need them.
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