Buy-to-let landlords aren't in competition with first-time buyers - penalising them is unwise and unfair
First-time home owners will on average borrow 78 per cent of a property’s value, compared to 70 per cent for buy-to-let borrowers. On that basis buy-to-let borrowing is more financially sound
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Your support makes all the difference.The Bank of England’s focus on cooling demand for buy-to-let mortgages represents the latest in a string of efforts to dampen the market.
Following close on Government changes to mortgage interest relief and stamp duty, landlords would be forgiven for thinking that they are being made the scapegoats for the failure by successive Governments to tackle the shortages in the supply of affordable housing.
The idea that landlords are looking to borrow as much as they possibly can while interest rates remain low does not stand up to scrutiny.
In its analysis of the state of the market the Council of Mortgage Lenders (CML) has noted that first-time home owners will on average borrow 78 per cent of a property’s value, compared to 70 per cent for buy-to-let borrowers. On that basis buy-to-let borrowing is more financially sound.
It is imperative that the Government publishes the evidence to back up the questionable assertions made to justify its ongoing assault on smaller scale landlords. Important policy decisions are being made on the basis of unproven and doubtful assertions.
The Institute for Fiscal Studies has been clear that landlords are in fact taxed more heavily than home-owners and the belief that buy-to-let investors are in competition with first-time buyers for the same properties is also questionable, contrary to assertions made by the Chancellor in the 2015 autumn statement.
As Professor Michael Ball of Reading University has noted in research for the RLA, in many cases landlords and home-buyers are often looking for different properties. Landlords have traditionally invested in older properties that do not appeal to first-time buyers due to the need for refurbishment. In areas of older housing, the prospect of homes standing empty, blighting communities, is now very real.
Underpinning the steps taken by the Treasury and the Bank of England are fears that a continued boom in buy-to-let lending poses a risk to the economic and financial stability of the country. Yet it is the Chancellor’s own changes to Stamp Duty that have fuelled the recent surge in investment purchases.
The Treasury Select Committee recently warned that “measures taken to curb buy-to-let” could “come at a cost to the wider economy” given the importance of the rental sector in supporting and encouraging a flexible labour market.
With Savills predicting that one million new homes to rent will be needed over the next five years, efforts to slow the market down risks stifling the homes the country desperately needs, leading to rents increasing for the very tenants the Government wants to assist into home ownership.
It is time instead for the Government to sand down the rough edges of its approach to the sector and work with the industry to secure a tax system for the market which encourages investment and helps tenants get in to home ownership.
On Stamp Duty, why not exempt from the new levy any new property that a landlord develops which adds to the net supply of new housing? Or extend cuts in capital gains tax to those landlords prepared to sell a rental property to their tenant?
The housing crisis does not afford the luxury of picking one tenure over another. We need all sectors firing on all cylinders to meet the demand that now exists.
Dr David Smith is Policy Director for the Residential Landlords Association. It tweets @RLA_News
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