The Government needs to step in. While it can’t do anything about interest rates, it can look at the tool it does control: tax.
The tax system is working against tenants trying to find a home. We need to encourage investment in the rental market, and that means reversing the decision to cut mortgage interest relief.
This was a decision taken by the former chancellor George Osborne based on a belief that the tax system was favoring landlords over homeowners. However, months after the change, Paul Johnson, director of think tank the Institute for Fiscal Studies, clearly refuted this line of argument. He told a House of Lords Committee: “The tax system is not, and was not, even before the recent changes, more generous to people buying to let.” This is because, unlike homeowners, properties let by landlords are subject to capital gains tax.
Alongside this, it is time to end the stamp surcharge on the purchase of duty rental homes. A tax on boosting the rental housing stock is simply logical. What is more, scrapping this would actually lead to increased revenue for the Treasury. According to research by analysis firm Capital Economics for the NRLA, ending the surcharge would see almost 900,000 new private rented homes made available across the UK over the next decade. This would lead to a £10bn boost to government revenue through increased tax receipts.
By discouraging the supply of homes for private rent, the government has played a major part in creating this crisis. Supply has been diminishing and falling further behind the level of demand ever since Mr Osborne began cutting mortgage relief in 2015. Now that mortgage rates are rising, the absurdity of those changes are being exposed.
It is time for a fundamental rethink of policy or hundreds of thousands of people are going to face real problems in finding a home in the coming months.
Ben Beadle is the chief executive of the National Residential Landlords Association
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