Love the landlords – it’s not their fault!
- Nearly half of UK rents pouring into government coffers (Housing Hand)
- Huge profit from Generation Rent doing little to inspire government to change housing priorities
- Only radical new approach likely to fix broken housing market
“Theresa May has not only failed to fix the broken housing market but has dealt it repeated blows during her time as Prime Minister. And it’s easy to see why. Despite her rhetoric around encouraging home ownership, the government is unlikely to turn down the near-50% tax that it receives from rents in the UK.”
Terry Mason, Group Operations Director, Housing Hand
Tax changes that have pushed the majority of landlords into paying 40% tax on their rental income – plus VAT – means that the government is profiting hugely from Generation Rent. While landlords and agencies have taken their turns at being vilified for keeping young people locked into renting for longer, not enough has been said about the government’s lack of motivation to fix the housing market, according to UK rent guarantor service Housing Hand.
The ban on letting agencies charging fees to tenants is likely to drive up rents, just as it did in Scotland. As agencies increase their fees to landlords, landlords will increase the rents they charge to cover the fees. Both have shouldered their fair share of blame for the situation. However, the government is certainly doing little to step back from the additional tax that will pour into its coffers as a result.
“Though a well-intentioned idea, the Tenant Fees Act has made the broken housing market worse. It comes on top of successive changes that have served to drive landlords away from the private rented sector. What we’ve actually been left with is a growing pool of tenants fighting for a reduced number of rental properties. The result? Again, rising rents, as demand increasingly outstrips supply.”
Terry Mason, Group Operations Director, Housing Hand
Only radical changes will fix the damage that Theresa May’s government has caused, according to the UK-based guarantor experts at Housing Hand. Reverting to taxing landlords on their profits rather than their income is the first step. After all, what business can survive being taxed at 40% on its income, rather than its profit? Scrapping the tax grab will see landlords returning to the market, rebalancing supply and demand and lowering rents as a result.
Then it’s time to address home ownership. Housing Hand advocates a government-backed deposit scheme, where individuals find a 2% deposit and the government loans them the other 8%. Doing so would move a whole generation into their own homes. Appropriate insurance – a reimagined mortgage protection insurance scheme, say – could easily be paid for by the home buyers as their mortgage payments would be so much lower than their current rental payments.
With more people buying, builders would step up their game too, as it would reduce their reliance on investors buying homes to rent out and line up a whole generation of would-be owner occupiers.
“As a result of years of mis-management, the new Prime Minister has a huge challenge on his hands when it comes to the UK’s housing sector. The leadership contenders’ promises will mean very little unless the government dares to make some radical decisions. Sadly, with so much to gain from the growth of Generation Rent, it seems unlikely that any big changes will be made anytime soon.”
Terry Mason, Group Operations Director, Housing Hand
For more information please contact Housing Hand today on +44 (0) 207 205 2625 or visit https://www.housinghand.co.uk/