Tax increases for private landlords could result in some leaving
the sector, while others may pass the costs onto the tenants via rent
increases, therefore stretching household budgets and putting home ownership
further out of reach.
This warning comes from a new report written by the London
School of Economics, “Taking Stock” which analyses the private rental sector
and its importance to the UK housing mix.
Despite the Government’s efforts to introduce institutional
investment in the form of ‘build-to-rent’, the majority of private rented stock
is made up from small private landlords with 2 or 3 properties.
The report also says that demand for rental accommodation is
set to grow and that to match this demand there needs to be investment in the
sector.
However, it points out that small private landlords are
already treated less favourably in terms of tax, compared to landlords in many
other countries. These include a surcharge on Stamp Duty Land Tax, removal of
wear and tear allowance and reducing the amount of mortgage interest eligible for
tax relief.
The authors of the report, Kath Scanlon, Christine Whitehead
and Peter Williams highlight that the private rented sector has more than
doubled in the last 15 years and now accounts for almost one-fifth of all
dwellings.
The report also states that the growth of buy-to-let is, in
part, a product of the low returns available to investors elsewhere in the
market. High house prices and the need for large deposits make it unlikely that
younger household will enter owner-occupation to the extent they did in the
last four decades – increasing the reliance on a strong private rented sector.
By hindering landlords via new tax treatments this could damage
returns and create disincentives to invest in the sector.
Kate Scanlon concluded: “The current Government favours institutional
landlords, but even if that part of the sector were to grow rapidly, small
landlords would still be the backbone of the industry"
“We need a private rented sector that works for the long
term, with policies that reflect the housing challenges the UK faces”
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