Tougher buy-to-let regulations not the answer to solving UK housing crisis
Fran Mulhall, Regional Operations Manager at North East property specialists GFW Letting explains why tighter regulations on the buy-to-let market is not the way forward in helping to fix the chronic housing shortage that UK families are facing.
In the last year or so, the Private Rented Sector (PRS) has undergone sweeping change. As it’s continued to grow rapidly, the Government has introduced a range of new legislation that puts tighter controls, and more pressure, on UK landlords. New laws include the removal of the 10% wear and tear tax relief for furnished lettings (introduced April 2016), an extra 3% stamp duty payable on purchases of second homes above £40,000 from 6 April this year, removal of higher rate tax relief on mortgage interest staged over three years from 6 April 2017 and capital gains tax payable on the sale of an investment property within 30 days from 6 April 2019. In what many landlords are calling an ‘Alice in Wonderland’ tax grab, such measures are making it financially impossible for them to continue in the business, let alone expand their property portfolio.
Add to this the news that banks are tightening the criteria applied to buy-to-let mortgage borrowers – lenders now need to take into account a landlord’s costs including tax liabilities, verified personal income and possible future interest rate increases – plus the new raft of legislation to hit landlords then it’s no wonder the Royal Institution of Chartered Surveyors (RICS) has recently reported that the UK is facing a “critical rental shortage” which requires a building programme to focus on providing for tenants.
According to the latest research from RICS, at least 1.8 million more households will be looking to rent rather than buy a home by 2025. As a consequence of the governmental focus on home ownership and the heavy handed approach to the buy-to-let market, the real issue here – the national housing crisis – is not going to change and by punishing landlords or those trying to make a living out of leasing property, it only serves to exacerbate the fact that simply not enough homes are being built to house the UK’s growing population.
If we are going to make headway with the shortage of homes, the Government needs to focus on building and investment and encourage landlords to purchase buy-to-let property. The greater legal and financial legislation only serves to either drive landlords out of the business, deters them from adding to their portfolio or puts them in a position where they have to offset the additional cost of leasing out a property to the tenant i.e. higher rents at a time when rental rates are already at a record high.
To increase available housing stock, the Government should really be looking at reversing the stamp duty rise and also focus on encouraging developers to build specifically for the rental sector. Councils should also be incentivised to release brownfield sites for building homes for tenants. Only in this way will we be able to make up some ground in tackling the housing shortage and move forwards from there.”
If you would like to discuss this issue further with Fran, please do feel free to get in touch with her on email@example.com or 0191 284 7171.