The government has been criticised yet again for what is described as its “incoherent” approach to the private rental sector.
David Miles, now a professor of financial economics at Imperial College London, has argued that contrary to the government’s stated aims, there are “few signs” that tax increases on the sector have benefited those hoping to become homeowners.
He argues that they are, meanwhile, “left in a rental sector with reduced choice and where rents are likely to be higher as supply gradually shrinks.”
Since 2015 the government has introduced measures to restrict mortgage interest relief on the private rented sector to the basic rate of income tax and imposed a stamp duty levy on the purchase of new homes to rent out.
In an article for the Residential Landlords Association, Miles attacks the government’s approach which has sought to cut investment in the rental market to support aspiring first-time buyers.
He argues that such buyers “are hardly helped by squeezing the supply of rental property and driving rents up.”
He goes on to say that there is nothing “intrinsically wrong with people being in the rented sector for an extended phase of their life. We should want to avoid a situation where people feel pressurised into taking big mortgages relative to their income early in life because the rental option is so poor.”
Miles goes on to conclude: “In a world where house prices might be consistently higher relative to incomes than in the past we might naturally expect the period in which people are in the rented sector is longer.
“And there are good economic reasons for believing that in a country with a rising population and where real incomes tend to increase over time house prices might well rise at least as fast as incomes. To have then introduced measures that reduce the supply of rented property is perverse.”
David Smith, policy director for the Residential Landlords Association, says: “Professor Miles hits the nail on the head. Choking off the supply of rental properties does nothing to help aspiring home first-time buyers who need somewhere to live now.
“It is time to change tack and recognise that we need more homes to rent as well as to buy in order to meet growing demand and have policies that support investment.”
%20-%20IMAGE%20Client%20Accounting%20%E2%80%93%20what%20are%20your%20options.jpg)
Join the conversation
Jump to latest comment and add your reply
Hit the nail on the head.
Rather than penalising the PRS which means abandoning all the recent ridiculous tax policies etc the FTB should be genuinely assisted.
That means allowing IO Residential mortgages at say 95% LTV with no repayment vehicle required with terms up til 95.
I would also offer HTB for pre-owned properties and allow MIRAS for FTB only for properties up to £350000 with that amount adjusted in accordance with general property price increases to avoid fiscal drag.
I accept that the taxpayer will effectively be funding those who are already better off than most but it would potentially reduce pressure on the PRS which could naturally deflate to bring about 10% of residency tenure.
I wouldn't object to some of my taxes being used to assist FTB.
Carrying out these suggested policies would facilitate purchase of rundown properties allowing such FTB to forcibly appreciate the value of those properties.
MMR has been a massive impediment for those wishing to become homeowners.
It needs to be adjusted to be far less onerous with IO Residential mortgages being allowed once again.
Please login to comment