Lord Flight, a former Conservative Shadow Chief Secretary to the Treasury, has once again criticised his own party’s buy-to-let tax changes, warning they could further exacerbate the housing crisis.
Ever since Margaret Thatcher declared her belief in a ‘property-owning democracy’ and introduced Right to Buy in 1980, the UK was converted into a country that saw houses as something to make money from, not just to live in, fuelling the growth of the private rented sector.
But instead of treating the private rented sector as part of the problem, Lord Flight is urging the government today to ‘recognise the important part it must play in solving the housing crisis’.
Having long provided mega double-digit returns for investors, investment in buy-to-let has outperformed all major asset classes in recent years.
However, Lord Flight fears that the government’s decision to introduce a number of measures to curb the growth of buy-to-let landlords will lead to a mass exodus of private landlords, reducing the supply of much needed homes in the private rented sector.
In an article published on the Conservative Home website, Lord Flight said that the tax chances, including the phasing out of mortgage interest relief will inevitably push rental values higher.
He wrote: ‘The biggest domestic issue of our times is the high cost of housing in the UK both pricing the younger generation out of home ownership and driving up rental costs.
‘Yet, since 2015, the private rental market has faced an onslaught of tax hikes, restricting mortgage interest relief to the basic rate of income tax, putting a premium stamp duty levy on the purchase of new homes to rent; not extending the 20% rate of capital gains tax to residential property and taxing a landlord’s turnover rather than profit, unlike any other business sector. The rationale for this assault on largely individual landlords was to shrink the private rented sector and so expect to increase the supply of homes available for potential home owners. It is, however, a nonsense to blame private landlords for the housing crisis – rather the large increase in private rented properties over the last decade has alleviated the shortage of residential accommodation.’
He insisted that a ‘strong and growing private rental market alongside a growing homeowner sector’ is necessary for a healthy UK housing market.
The politician added that due to the importance of the buy-to-let sector, it is concerning that, according to research by the Residential Landlords Association, 69% of landlords are not making further investment in rental property, ‘largely as a result of the punitive stamp duty levy they now face’.
To help encourage investment in the BTL sector, Lord Flight would like to see the government scrap the stamp duty surcharge and introduce ‘tax incentives for landlords prepared to offer longer-term tenancies’, insisting that it is ‘somewhat illogical for the tax system, as it currently does, to make it more attractive for a landlord to switch properties to short term holiday lets than to continue providing homes for long term rental’.
He also wants ministers to consider providing landlords with capital gains tax relief where they sell a property to a sitting tenant to become a home owner.
‘It is time that the Conservative Party went back to Nigel Lawson’s more positive housing policies towards the private rented sector,’ he concluded.