The problem with having a thoroughly inexperienced Chancellor and a properly ‘woodenheaded’ Prime Minister, is that they are learning the job ‘on the hoof’ and we are all going to pay a hefty price for this ineptitude.
In advance of this autumn’s Budget, the Treasury is casting out more floaters than a sewage farm and in doing so, is trying to assess the reaction to their proposed tax plans, which no doubt will be thoroughly indigestible, but their hope is that it will help fill a self-engineered £40-50billion hole in the government finances.
The latest proposal is to tax landlords via National Insurance charges on rental income, which supposedly could generate £2billion for the Treasury’s coffers.
Although this is relatively de minimis in terms of the UK Budget (which is £1.279trillion), it is none-the-less, the ‘straw that would break the camel’s back’ for the lettings industry, which has become asphyxiated by the following, relentless legislation and regulatory changes, imposed over the last ten years…
Mortgage Interest Relief restriction, 2017-2020
Landlords can no longer deduct full mortgage interest as an expense.
Stamp Duty Land Tax surcharge, 2016
An extra 3% surcharge on additional property purchases.
Reduction in wear and tear allowance, 2016
Old 10% wear and tear allowance replaced with actual costs.
Energy efficiency standards, 2018
Rental properties must have at least EEPC rating.
Right to Rent checks, 2016
Landlords must check immigration status of tenants – a legal compliance burden with penalties for errors.
More stringent safety standards, 2020-2022
Mandatory smoke and carbon monoxide alarms.
Electrical safety standards, 2020
Stricter fire safety regulations in HMOs.
Tenants Fees Act, 2019
Landlords/agents can’t charge most fees to tenants (i.e., letting/admin fees etc.) shifting costs to landlords
Deposit cap, 2019
Security deposits capped at five weeks rent.
‘No fault’ eviction reform, 2019
The Renters’ Rights Bill will abolish this.
Longer notice periods, 2020
This was introduced as a result of the Pandemic.
Prudential Regulation Authority stress testing, 2017
Tougher affordability tests for buy-to-let mortgages including portfolio landlord rules.
Higher mortgage rates, 2022
Rising interest rates squeezed profitability.
Renters Reform Bill, imminently
Introduction of open-ended, periodic tenancies and creation of National Landlord Register.
Talk of high energy standard by 2028
Private buy-to-let landlords comprise 12% of all homes in the UK and 93% of them are individuals or groups with just 6% operating through a company.
The ‘golden goose which lays the golden eggs’
Given that 19.4% of all dwellings in the UK are privately rented, with 17.5% socially rented and 61.7% of homeownership, you would have thought that the government would want to do everything possible to protect the ‘golden goose which lays the golden eggs’… wouldn’t you?
As such, 31% of all private landlords are planning to scale back their portfolios and almost 90% have cited regulatory or tax changes as the primary reason.
Over the past few decades, successive UK governments have under invested in social housing resulting in a significant shortfall.
Right now, local authorities and the Housing Associations cannot meet demand so that the private rented sector absorbs millions who can’t afford to get onto the property ladder and would otherwise rely on social housing, of which 1.2million families are currently on this list.
Rents are rising relentlessly by 10%
With private landlords now determined to sell up and flee the sector, the net effect is that supply of rental properties is shrinking, and rents are rising relentlessly by 10%, making them even more unaffordable for the vulnerable.
As if the foregoing isn’t bad news enough, currently, the build rate of new homes is roughly 200,000 per annum and well below the 300,000 per annum target of the government in the Labour Party’s manifesto.
Reliable analysts have predicted that over the next five years only 840,000 will be completed which will be 42% short of the 1.5million target guaranteed by the Housing Minister.
What do people do when they are uncertain … they do nothing!
We all know that the Chancellor is trying to fill a £40/50billion hole in her Budget but these ‘floaters’ of draft legislation are serving to undermine confidence in the markets and what do people do when they are uncertain… they do nothing!
‘Suck it and see’ policy
This method of ‘suck it and see’ policy is having a devasting effect on decision making across the housing sector and this can only exacerbate the shortfall of tax return for the Treasury from transactions which have failed to materialise as a result.
The government, with their terminal myopia, seems to conveniently forget that the private rental sector is vital to providing homes for those who can’t afford to get onto the property ladder. As long as they can’t build appreciably more social housing, they need to pay due respect to this sector, instead of treating buy-to-let landlords as pariahs.
Everything that this government seems to do nowadays, across the board, somehow always turns to the ‘brown, unfragrant, sticky stuff’ and as the say, ‘none so hopeless as those that do not bother to read the room.’
