The decline in the supply of rental housing remains an issue in the UK, and landlords say the Chancellor needs to use his first Budget to take immediate action.
More properties are being sold by landlords than purchased, and others are making the decision to switch to short-term holiday lets for tax reasons. Therefore, unless action is taken, tenants are going to find it increasingly hard to find the home they want.
Investment in new rental properties has been slowed by the introduction of measures such as the 2016 3% Stamp Duty levy, knocking the confidence of landlords across the country.
The drain in rental accommodation is only made worse by an incentivisation from the tax system for landlords to switch their properties to short-term lets. As a result, ARLA Propertymark is warning that almost half a million homes could be made unavailable for tents in need of long-term homes to rent.
In their submission for the Budget, the Residential Landlords Association (RLA) and the National Landlords Association (NLA) argue that the tax system entirely contradicts the Government’s housing objectives.
The RLA and the NLA are calling for a fundamental review of the way rented housing is taxed to ensure that tax policy supports, rather than contradicts, government objectives. Their proposal is for the Stamp Duty levy to be dropped where landlords add to the net supply of housing through developing new properties. This includes bringing empty homes back into use or converting large properties into smaller, more affordable units of accommodation.
The associations also propose that tenants are supported into homeownership by introducing a Capital Gains Tax exemption for when landlords sell a property to a sitting tenant.
In addition, they are calling for tax relief for landlords investing in measures to improve the energy efficiency of a rented property or those who let adapted properties long-term to tenants with accessibility needs.
David Smith, Policy Director for the RLA, comments: “The tax system for rented housing is failing. It encourages the provision of holiday homes over long-term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.
“For the sake of those living in rented housing or who are looking for accommodation, Ministers need to use the Budget to urgently change course to ensure that their tax policies are positively aligned with their wider housing objectives to encourage good landlords to provide long-term affordable housing.”
Chris Norris, Director of Policy and Practice at the NLA, said: “The tax system with which landlords must contend is no-longer fit for purpose. HM Treasury has constructed a series of barriers to investment, which make running an efficient and successful lettings business borderline impossible.
“As he prepares his first Budget, we hope that the Chancellor will take the opportunity to use taxation to encourage investment in new and existing homes alike. Mr Sunak must recognise that housing costs can only be reduced by making it easier, not harder, to provide good quality rented homes.
“The emphasis must be on finding solutions and encouraging investment across tenures amongst a diverse range of providers.”