Well here we go, it looks like the housing rental market is in for a round of potentially short sighted and potentially very damaging political interference……..the “war” on buy to let landlords.
UK economic policy has for the last 30 years believed that the open market is the best way forward for the economy. It encourages innovation and enterprise.
Government interference has been kept to a minimum and although we have had peaks it is a model that has got us out of recession quicker than the rest of Europe. But the current Government has abandoned this policy in the housing sector and seems to be attacking Buy to Let landlords.
YES – it is true that there has been no real UK housing policy since the 1960s
YES – it is true that house prices have grown consistently even during the recession
BUT – house prices are not increasing uniformly across the country
BUT – it is not just first time buyers that have a problem with house prices
There are 3 strategies that the Government seems to be employing but they are poorly thought through and the consequent legislation is “knee jerk”. We have seen “knee jerk” legislation before and this will not be the last time. It never works well and there are always unintended consequences.
Firstly, it has increased the SDLT (that’s HMRC speak for Stamp Duty) on second properties, so Buy to Let gets caught. The new SDLT is equivalent to about 6 to 9 month gross rent. Will that put new landlords off – we doubt it.
Next, the Gov’t decides that legitimate interest costs are not an expense anymore and so are phasing in a reduction in the amount of interest that can be offset against a Landlord’s tax bill. Yes it will be phased in between 2017 and 2020, but the ridiculous position is that you could end up paying more income tax than your total income.
This is a rather risky and unintended consequence. It is either an expense or not. The ex-Prime Minister’s wife, Mrs Cherie Blair, is mounting a legal challenge on this point and unsurprisingly being supported by some major landlords.
Lastly we have the PRA, that’s the Prudential Regulation Authority, who regulate banks and mortgage lenders producing a paper called CP 16/11 which seeks to impose tougher stress testing on BTL mortgage rental cover calculations in order to protect the Banking system from the bad loans that could possibly result from landlords being unable to afford their mortgage payments. Strange really because there is shortage of housing, rents are going up, interest rates are static. Thus the only likely pressure on landlords will be as a result of the increasing tax burden. It sounds like politicians are bending someone’s ear. Oh no sorry, the PRA are independent, according to their publicity and their charter. Wikipedia describes the PRA as a “quasi-governmental regulator” – sounds like Wikipedia are right.
Why is this Government mounting an all-out attack on landlords? They are ignoring the important role of private landlords in providing housing. Councils have ceased to do it and Housing Associations provide a only drop in the ocean.
Where will people live when the buy to let landlords start selling of their portfolios?
Norman Phillips, Director of letting and property management specialist Network Property Management Ltd has said “This is a very dangerous and misguided policy. We have taken a straw poll of landlords for whom we act and who have owned house for to 10 to 15 years. As a result of sale of portfolios, we will be making over 400 hundred families homeless during 2017. I have written to my MP and await an answer! “
“Sure those families on housing benefit cannot afford to buy, but don’t forget that culturally in some parts of the UK, people do not want to own their house – so who will house them?”
Phillips went on to say “Buy to let works well in the North of England and in some parts of the South. High yielding HMOs/Multi Unit Freeholds work everywhere, including the in the South, but they will be caught too”. He went on to say that the jury is out on the Limited Company Buy to Let idea “for so many reasons”.
We have a European wide migrant problem and when these people arrive on our shores, they won’t be able to buy for years; where will they live?
Mark Lanario, Senior Specialist Mortgage Consultant at Enhanced Wealth Ltd said “If there is to be a sale of property portfolios, as seems likely, and the market is flooded, what will happen to house prices? Will this cause negative equity? Has the PRA thought of that? I am sure the lenders do not like that idea. This war on the private landlords is contrived, illogical, poorly thought through and thoroughly reprehensible. They should be ashamed of themselves for turning their backs on the very people that allowed them to gain votes and popularity selling off the council housing stock”.
We are sure that every buy to let landlord in the UK wishes Mrs Booth/Blair the best of luck with her legal challenge to the Government’s taxation changes.