A Conservative peer and former shadow chief secretary to the Treasury has condemned the government’s “sudden attack” on the buy-to-let market and warned that it risks causing the very crisis it is aiming to prevent.
Lord Flight said on the Conservative Home website that the government was wrong to introduce new measures to curb buy-to-let and that its actions could put the security of thousands of tenants at risk as landlords look to evict before they sell.
He said: “I hope the government will re-think its sudden attack on buy-to-let this summer and autumn. Otherwise, it risks the very crisis in the buy-to-let housing and lending markets of which the Governor of the Bank of England has recently warned.”
Bank of England Governor Mark Carney has expressed fears that the high levels of lending in the buy-to-let market was a potential threat to the UK’s economic recovery as borrowers could be exposed following a downturn, which could hit the wider housing market and economy.
In December, he said the central bank was prepared to take action over concerns that large numbers of landlords could sell if prices were to crash again.
Lord Flight argued that buy-to-let was an “entirely sensible” market economy development providing an alternative to saving for retirement through pension schemes.
He said: “Given the poor performance of the stock market over the last 20 years, it is hardly surprising that many people have opted for buy-to-let investment as an alternative, and more successful, retirement provisioning investment. Buy-to-let has, moreover, provided some three million homes for those not able yet to afford to buy their homes – especially in London.”
As part of the Autumn Statement last year, Chancellor George Osborne announced an increase in stamp duty of 3% for landlords and second home owners as part of the government’s efforts to dampen the buy-to-let market. The amount of tax relief landlords can claim on properties will also fall from April 2017.
Critics have argued that these changes could lead to an increase in rents as landlords look to recoup their money by pushing up prices.
“The risk is self-evidently, that as some buy-to-let investors are motivated to sell as a result of the reduction in the tax offset of mortgage interest, potential buyers will be put off by the additional 3% stamp duty on top of what are already confiscatory rates of stamp duty applying in London where properties are generally more valuable,” said Lord Flight.
“More sellers and fewer buyers clearly has the ability to create a sharp fall in prices, if not a crash. A significant increase in those selling buy-to-let properties may also put thousands of tenants’ security at risk as buyers will want to sell with vacant possession,” he added.
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I couldn’t agree more. I personally wrote to my MP who passed on my views to the Minister responsible for housing. As a small time landlord, I am extremely disappointed in the Tories decisions to penalise landlords, The changes in tax relief will mean that I am actually making a loss rather than a profit, forcing us to sell what was a long term investment. Less Landlords and available properties to rent will surely push prices up. This is yet another example of the government making knee jerk reactions without thinking of the longer term effects of their actions.
I agree with this sentiment. I own 4 buy-to-let properties which are my pension provision. My tenants are: in London – young executives, just in their first or second jobs who have no intention of being tied down to a mortgage or a property as they are only there for a couple of years but they want to live in a ‘nice’ property; in Olney- they are a family who emigrated from Zimbabwe and are on semi housing benefit, hard working and pay less than the going market rental; in Turvey- it’s a family on a job move who are not looking to buy as they eventually will return to Glasgow. If I have to sell these properties, who is going to supply this market? It will create chaos in the rental market. Housing authorities will be inundated with homeless people and there will either be nowhere to house them and private rents will rocket.
Surely, having been encouraged by the government who insisted some years ago that private landlords would be treated fairly and would only be taxed on profit not turnover, – effectively treated as a business, it is now morally wrong to penalise those of us who could only have put property in our own names and not in a company name.
These comments are totally justifiable, given that the Chancellor has encouraged people to reinvest their pension elsewhere. Furthermore how can anyone be expected to plan sensibly for their retirement when the rules keep changing so dramatically? Does the government want us all to throw the towel in and emigrate or live our retirement years dependent on state funding?
Those of us who have and still are working hard to ensure our own futures are also having to think about funding our children for longer and helping out elderly relatives for whom NHS support was previously available but is now overstretched.
No accountant or tax inspector could justify the treatment of mortgage interest as anything other than a cost to be offset against income according to normal accounting rules. It is ridiculous to compare the mortgage interest of an individual’s private home with that of an investor providing a service for his tenants. I don’t make any profit on my buy-to-let because I keep it well maintained to ensure my tenant is happy and keeps paying the rental. If I make a capital increase, it is down to a combination of luck and judgment but like most investments there is risk associated. If I could make 5% on a risk free bank deposit, be assured I would. No one becomes a landlord for the fun of it! With recent requirements like testing for legionella adding to the cost of being a professional landlord, the Chancellor is way about of date if he thinks this is an easy way to make money. If foreign buyers are the issue, why not make it more difficult or them to buy?
What really grates is that the housing crisis – the same one affecting our children and therefore bank of mum and dad potentially – has largely been exaccerbated by consecutive governments failing to resolve issues in the planning process, failing to find solutions to the shortage of houses being built year on year, and despite this, insisting that we can find homes for the thousands of immigrants who have entered this country over the last ten years.
We need to find a solution to the political short term thinking that inevitably controls each and every government that comes into power. In the case of buy-to-let investing, the Chancellor’s measures were more about attracting certain votes than finding a real a long term solution to the housing crisis.
As a landlord these comments ring true, we have started to invest in the buy to let market simply because for the pension and banking issues over the last 3 years or so, now feeling that the Government who has for so long been pro own business and make ones self dependant and not relying on the state, now seem to be as stated attacking us for doing the very thing they were strongly wanting, people to build their own future and yet when we do the Tories take it away. I for one will never vote Tory again after this attack, as I have always aligned with a Government which supports the self employed and individuals that are allowing people to live in good rooms with high level accommodation. Easy tax for the Tory crippling for the very people who are giving homes to those who can’t afford one. What plans have they got for the increase in the homeless as this is just one effect this tax and attack will cause.
Raising taxes disguised as a means to bring some other benefit to the public and/or the markets is just another government scheme for increasing tax revenues and nothing else. The finer points of this argument will therefore be lost on government tax authorities because they have other agendas than those which have been put forth to justify the tax increases.
I take great exception to the inferred criticism of private landlords and the sudden withdrawal of support for them in terms of tax incentives for buy-to-let mortgages and the increased stamp duty at time of purchasing a potential rental property. My husband and I were forced to consider taking on some buy to let mortgages and set ourselves as landlords with the collapse of our pension, sadly in the hands of Equitable Life. Both our pensions became worthless over the period in the run up to our retirement and we had to do something to bolster our financial position as pensioners. We have been landlords now for some 15 years and have made a very good fist of it. We have been fair in our rents, regularly covered repairs and renovation of properties, kept white goods in good working order replacing as necessary and have always had a good relationship with our tenants. All carpets, floor coverings and curtains are provided and gardens maintained. Our tenancies have been very settled often over a number of years …8 years being our maximum so far. I have always prided myself that I would have been happy living in any of our properties.
By comparison I remember my days as a social worker, visiting families in council rental properties which were often damp and generally very poorly maintained. Getting repairs agreed and carried out was its own nightmare and there was often an excuse to avoid the job altogether. No white goods, carpets and curtains were included in the tenancy. Whole areas became run down and unfit for families to live in safely.
Why doesn’t the government appreciate the job we private landlords do and accept the value we give to the community.
Putting rents up…we have had very few rent increases in our 15years and have been extremely fair in our support of our tenants and have always been prepared to listen to them.
Stop whingeing you landlords, you lot have had a easy ride for the last twenty years on the backs of hard working middle class & working class who pay 40% / 25% .
Why should anyone be able to make £50000 to £150000 a year for doing Nothing ? , I thing the government tax should have been 5 /10%.
What a cheek for Lord Flight to complain? Handsome salary for Sleeping in the House Of Lords.
All your Comments show how out of touch you all are !!!
Kind Regards
To THE ONLY ME SOCIETY
Good in part but he should focus on the damage to tenants and the housing sector rather than any loss of advantage by landlords.
I think he’s quite clear about the risk to tenants to be fair. 3% stamp duty on purchases and in particular, less tax relief will mean that landlords will be making a loss in certain scenarios. Whether people care about this from the landlord’s perspective or not, they really should, because this will inevitably cause an increase in rents for tenants.
I think part of the problem is the persecution of landlords. The stereotypical view is of a fat cat with 100+ properties spending half the year in the Caribbean. When in reality, many landlords have a very small amount as an alternative to a conventional pension.
The buy-to-let market has a huge role to play in a stable housing market. Come April, sales will fall and there will be a reliance on first time buyers to purchase the types of property targeted by buy-to-let investors. Prices will follow suit and history tells us that rather than buy, people will wait for fear that the market is crashing, helping to cause the very thing that they’re worrying about.
I voted Tory and am mostly happy with my choice, but this is something that I think they’re getting wrong. Landlords are seen as an acceptable taxable target rather than an important part of the housing market.
I agree with Lord Flight comments, increasing the stamp duty on already over priced properties, specially in London, will have a significant effect on decreasing number of properties to rent, increasing rentals and make it difficult for young employee to afford paying rental. 3% is much higher than inflation rate and salary increase. The result will have significant effect on everything such as high inflation, poor quality of life and wouldn’t be easy to cope with the already experiencing slow growing economy.
fully support most of the posted comments so far. I am a pensioner and my partner is 7 years younger than me and won’t get a state pension until aged 67 ( I will be 74 years old). I have a chronic neurological condition which is progressive so no idea how long my health will hold up. With hard earned savings we bought 3 properties over the last 6 years on buy to let mortgages with a view to my partner retiring at 60 to help care for me. She will have no income except for the rents on these properties for 7 years. We didn’t want to rely on state benefits & carefully planned our financial future so we wouldn’t need to. Incidentally, NW England rents are nothing like the sky high rents in London- which in my opinion should be treated by the chancellor as the completely separate property ‘island’ that it is. It is most unfair to impose a ‘1 size fits all’ policy when the property market is so different in various parts of the country. I have family who rent in London and they pay 5 times the rent for an equivalent 3 bed semi in an average area. We are fair landlords more interested in a decent tenant than charging top rent, repairs are done instantly and rents stayed static for last 5 years. We have also seen the tough side of letting- tenant just died(a lovely lady) but the house is a mess and garden a building site. This, despite quarterly inspections! A friend had same experience with a ‘flit’ owing 4 months rent and the house trashed needing a new kitchen + garden landscaping. No-one mentions the risks of letting or that landlords need a tenants ‘blacklist’ to protect them.