A major house-builder has blamed, in part, the recent tax increases on private landlords as a reason for not increasing the number of houses it has been building.
The importance of landlords and other property investors in the buy-to-let market, according to the Berkeley Group, is that they “buy early in the cycle and provide security of cash flow to enable complex, capital intensive developments to be brought forward.”
Without the demand for new houses for domestic and residential buy-to-let landlords, Berkeley Group says it’d be impossible to boost housing supply beyond its current plans.
Landlords put off investing in property since the increase in taxes
In many ways, it’s unsurprising that the buy-to-let industry has been subdued recently, as investors are moving with caution since the April 2016 introduction of the 3% Stamp Duty levy. Combined with the reduction on mortgage interest tax relief, and tougher criteria from lenders, landlords and property investors seem to have been put off investing in new properties.
This is supported by the Residential Landlord Association’s (RLA) research exchange, PEARL, which has found that 69% of landlords have been put off investing in new properties due to the Stamp Duty levy. Of the 3,300 participants in this study, this means that 2,277 have been put off investing in new property – which could logically mean that there might be 2,277 less rental homes available to those who need it.
David Smith, Policy Director for the RLA, said:
“We have long warned the Government of the dangers of its tax raid on the private rented sector. Now we see its impact, with investment in new homes slowing and house builders not confident to up their levels of house building.
“Rather than taxing new homes, it is time for smarter, pro-growth taxation that recognises the rental market as a crucial part of addressing the housing crisis.”
Why have the tax increases been put in place?
The government is wanting to push homeownership, and one way of doing this is to slow the buy-to-let market, in theory leaving more properties available for first-time buyers to get on the property ladder. However, this is arguably not the effect it’s been having – landlords have been put off investing, and people who might one day be able to afford their own home still need places to live in the meantime.
Getting prospective homeowners out of the rental market and onto the property ladder might require more foresight than just increasing charges to UK landlords (most of whom are individuals, as opposed to corporations, meaning slight increases can have large impacts), such as a provision of tax relief. An increase in property investments to let, as well as schemes to encourage landlords to sell to tenants.
Check out this article which discusses possible ways that the UK housing market could be improved, in addition to new-build housing developments.
For more detailed information on the 3% Stamp Duty charge, check out this guide.