Landlord tax break plans causing friction in housing market
After the Council for Mortgage Lenders (CML) reported a sharp drop in the number of first-time buyers entering the market since the credit crunch began, PricedOut, a lobby group, said the government risked exacerbating the unfair advantage already enjoyed by buy-to-let landlords.
The Treasury published a consultation paper in February which included plans to boost the supply of private rented housing. One key proposal was for professional investors to pay stamp duty separately on each home, even when they buy a large portfolio of properties, reducing their total bill.
PricedOut, which campaigns on behalf of first-time buyers who are not able to enter the property market, says the proposal is grossly unfair to first-time buyers and would make their struggle to buy a house even more difficult.
William Griffith, spokesman for PricedOut, said: "The large tax breaks that buy-to-let currently enjoys mean that they can always outbid first-time buyers. It is astonishing that the government is seeking to further entrench this disparity in the housing market. High house prices and buy-to-let speculation have been behind a large growth in wealth inequality and have caused increased financial instability."
PricedOut calculates that high house prices, driven in part by the rise in buy-to-let, have displaced an estimated 1.2 million new households away from owner-occupation, and led to about 1.4m fewer first-time buyer mortgages since 1999.
A recent report by the Council for Mortgage Lenders (CML) found that levels of owner occupation were at their lowest since the 1980s.
A Treasury source said the proposal was aimed at increasing housing supply, but PricedOut argued that instead, buy-to-let investment has created a net loss in the supply of houses available to first-time buyers and other owner-occupiers.
In the last six years, 647,300 homes have been bought up by buy-to-let investors when otherwise they might have become available to other buyers.
"The public face several years of higher taxes and spending cuts – it is frankly baffling that the government is trying to give further tax breaks to a sector that helped get us into our current economic mess," said Griffith.
"Unless we want future home ownership to be a preserve of the wealthy few, we need the government to tax property speculators more, not less. Removing buy-to-let tax breaks would be a very popular and practical way for the chancellor to start addressing the deficit."
Mortgage figures from the CML released last week showed that first time buyers were once again struggling to enter the property market. The number of loans for the first-time buyer market plunged 54% in the month to January to stand at 11,300. The CML said this reflected the fact that a high proportion would usually be buying homes costing between £125,000 and £175,000, on which stamp duty was reintroduced at the end of last year.
Jonathan Moore, director of Easyroommate.co.uk, said: "First-time buyers were struggling to raise the huge deposits needed by lenders before the end of the stamp duty holiday. That's only got worse. Without help from the bank of mum and dad, many just can't borrow enough to get a flat. Thousands of young people are being forced to … squirrel cash away for more than a decade."