Recent tax changes aimed at helping first time buyers by targeting landlords are ‘profoundly wrongheaded’ according to a former Bank of England policy maker.
David Miles, who is now a professor of economics at Imperial College London, said that while politicians felt that concerns over the cost of living meant politicians had to show they were on the side of ordinary people, policies such as Section 24 and increases to Stamp Duty would inevitably backfire.
He said; One response, and in some ways it has been perhaps the most significant housing policy response in recent years, is to point one’s finger at the rental sector and say, well it is kind of their fault.
“My own view is that this is profoundly wrongheaded.”
Buy to let reforms costing landlords.
Recently landlords have been bombarded by a series of policies that have hit them financially. Under Section 24, mortgage interest tax relief for buy to let investors will be phased out between April 2017 and 2021, meaning landlords will be taxed on their turnover, rather than their profits.
The policy could potentially see landlords facing an effective tax rate of more than 100% on their rental income, leading to fears that it could force up rents or even push many landlords out of the sector all together.
At the same time, the Government has also increased Stamp Duty on second homes, banned letting agents from charging tenants fees, which could see these costs being passed on to landlords, and capped deposits at one month’s rent, which has many landlords worried they could be left out of pocket if tenants damage a property.
Tenants suffering as well.
According to Mr Miles; “I think these measures were introduced in order to try to help make housing more affordable for people who want to buy them, I think they are almost certainly wrongheaded.
“I suspect that they will have a negative impact on the ability of young people to become homeowners, because those people are in the rented sector already.
“Making rental property more expensive, as is very likely if you reduce the attractiveness to suppliers of rented property, if a side effect of that is to make rents even higher, it is very hard to see that as helping the people who you are trying to help become homeowners.”
We can help.
If you’re a landlord struggling with the impact of recent changes such as Section 24, or if you have properties in negative equity and need to sell, contact Landlord Debt Advisory on 0161 222 4311 or online at landlorddebtadvisory.com.