The Association of Residential Letting Agents (ARLA) believes that removing the 10% wear and tear allowance for landlords and instead applying tax relief on replacement furnishings will not help tenants.
Removal of Wear and Tear Allowance Not Good for Tenants
It argues that landlords could be less inclined to buy good furniture and furnishings initially, and that rents could rise as a consequence.
In its formal response to the Government consultation, ARLA states: “It is important to remember that most landlords are not cash rich.
“Most are heavily leveraged through buy-to-let mortgage products. As such, with house prices continuing to rise, net rental yields are only around 4% for most landlords.
“As the current wear and tear allowance is dependent on the amount of rental income received, we expect to see a rise in rents as landlords try to balance their books and recoup the lost revenue brought about by these changes.”
ARLA argues that the Government has not considered the impact of its plans on tenants, who would have to spend more of their wages on rent if prices increase, thus reducing the amount they can put towards a deposit, “and therefore putting the dream of homeownership further out of reach.”
ARLA also comments on the administrative burden that landlords will face when the new system is introduced in April 2016.
It says that “significant amounts of evidence” will be needed to claim the relief and guidance must be published to explain to landlords what they can and cannot claim for.
The group also reminds the Government that the current wear and tear allowance is applied to the initial cost of furnishing a property: “By withdrawing this relief, landlords will be faced with a larger financial burden… and may buy cheaper and less durable furniture and furnishings, knowing they will be able to use the allowance to replace poor quality furniture.”1