Should landlords get more tax breaks? (Yes and No)

Extra regulation and less help with costs have made buy-to-let far less profitable. We ask if incentives are needed to keep the rental market going.

More than a quarter of landlords sold rental properties last year, according to the National Residential Landlords Association, and a fifth expect to sell their portfolio within a year, according to HM Revenue & Customs.
This trend is likely to increase when the Renters’ Rights Bill, which is expected to be introduced this year, imposes tougher rules on evictions and rent rises.
It comes on top of the scrapping of “wear and tear” allowance and increases in stamp duty for second homes in 2016 and the phasing out of mortgage interest relief between 2017 and 2020. Higher-rate taxpayers once enjoyed a 40 per cent saving. Now, all landlords receive a basic-rate tax credit of 20 per cent.
With the buy-to-let market increasingly squeezed, should some of these tax breaks be reintroduced to stop the landlord exodus?

Yes
Paul Shamplina, the founder of Landlord Action, a group that helps landlords with evictions

Full tax relief for landlords should absolutely be brought back. The removal of mortgage interest relief, stopping them from deducting mortgage costs from the tax they pay, has unfairly penalised landlords since 2017.Instead of getting up to 40 per cent tax relief, all landlords now only get a basic-rate tax credit of 20 per cent.
This has distorted the economics of renting and put pressure on the very tenants it was supposed to protect. Landlords are now taxed on much of their turnover, not just their profit, something that would not be tolerated in any other industry.

Paul Shamplina thinks landlords are treated harshly compared with other business sectors

Imagine a shop owner being taxed on total takings without deducting the cost of stock, staff wages, or rent. It’s unthinkable. Yet that is the reality many landlords face.

This unfair tax treatment, introduced by George Osborne, marked the beginning of the end for many landlords, while generating millions for the Treasury and leading to excessive rent rises for tenants. Who are the winners here?

Since then, rising interest rates and new regulations, such as the Renters’ Rights Bill and an impending rise to Energy Performance Certificate (EPC) standards, have added further uncertainty and costs. Together, these changes make the business of renting simply unviable for many.

The result is landlords selling up, good tenants being asked to leave their homes, rents rising, and housing stock failing to meet demand in a country with a long-standing housing shortage.

Beyond finances, there is a wider problem. Landlords have long been unfairly cast as villains, despite being providers of a vital service. Few industries see two parties both benefit from a transaction, yet have one side so demonised. You don’t see Uber drivers or hotel owners similarly vilified by their customers.

Most landlords provide excellent standards of housing, but this goes unrecognised. This narrative must change. Landlords and tenants rely on each other, and a strong rental sector requires mutual respect. Landlords need more incentives, not fewer.
In my view, there should be tax incentives to encourage landlords to offer longer tenancies, greater tenant security, and better housing conditions, the very goals of the Renters’ Rights Bill.

Reinstating higher tax relief won’t solve every issue, but it would restore balance, ease rent pressures, slow the exodus of landlords, and signal that the government values responsible landlords who provide essential homes.

It is time to see landlords as partners in solving Britain’s housing crisis, not the problem.

Danny Dorling thinks the private rental sector needs to shrink

No
Danny Dorling, a social geographer and professor at the University of Oxford

The country’s property market is concentrated in just a small number of hands, with only about 2-3 per cent of people being private landlords.

According to the latest English Housing Survey many private landlords own more than one property, with 17 per cent owning five or more. Those with five or more properties are responsible for 49 per cent of all tenancies.

And the people who rent from them are likely to be the poorest — a third of children in poverty are living in privately rented households, according to the Institute of Fiscal Studies, a think tank.

This was never the plan when rent regulations were weakened in the 1980s. Today our poorest families face the highest housing costs. When I was a child, many more families lived in social housing, which meant most children had security of tenure. If their parents paid the rent or mortgage, they could stay in their school and keep their friends.

Now more people, particularly the poorest among us, can lose their homes with just two months’ notice, purely because the landlord decides to increase the rent, or wants the property back.

If some private landlords sell on the private market because they think they can make more money elsewhere because they are not receiving enough tax breaks, then that is fine.

If an owner-occupier buys it they can usually use the home more efficiently and fill more of the rooms with family members. Private landlords can often have properties that could house families but instead let them out to single young professionals.

For those who can’t afford to buy, the government needs to build more social housing, rather than spending that money on giving private landlords tax breaks.
The English Housing Survey repeatedly shows that the private rented sector provides the lowest quality housing. Stories of hard-up landlords are now the basis of ironic jokes about tiny violins.

Giving tax relief to the already extremely well-off has become unacceptable in a cost-of-living crisis. A home is too important to be another person’s investment. Tax relief is not needed and we should aim to shrink this sector.

OK, the cruise ship industry might suffer a bit; landlords might buy fewer fine wines and art; and a little less money will be left to the children and grandchildren of those who profit from others’ need for a home.

All this is a price well worth paying to reduce the misery that insecurity of tenure and high rents bring.

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