The chancellor must end a tax on new homes for rent in next month’s Budget or risk a crisis in the rental market, says the National Residential Landlords Association.
The body is calling on chancellor Rishi Sunak to scrap the three per cent stamp duty on the purchase of homes to rent where landlords invest in homes that add to the net supply of housing.
The NRLA, which represents over 85,000 landlords, says this exemption should “include developing new housing, converting large properties into affordable units, changing the use of a property from commercial to residential or bringing one of the almost 650,000 empty homes in England back into use”
The association’s call comes after the Royal Institution of Chartered Surveyors December survey said rents will rise because the demand for properties is rising, while new instructions from landlords continue to “dwindle.”
Property website Rightmove revealed last month that outside London rents rose in the fourth quarter of 2020 for the first time since 2011, leading to a record average of £972 a month.
This week Bank of England governor Andrew Bailey forecast that the UK economy is expected to shrink 4.2 per cent in the first three months of the year, amid tighter lockdown restrictions to slow the spread of the virus.
But the governor expects a rebound this spring as consumer confidence returns, as a result of the country’s rapid Covid-19 vaccination programme.
Chancellor Sunak will unveil his Budget on 3 March, and has pledged to “set out the next phase of the plan to tackle the virus and protect jobs”.
NRLA chief executive Ben Beadle says: “To have a tax on developing new housing is completely nonsensical at a time when more is needed. Supporting growth in the private rental market, alongside all other housing types, would provide a significant boost to the economy in the midst of the Covid-19 pandemic.”
He adds: “Research published last year suggests that landlords inject over £3.5bn into local businesses across the UK.”
NRLA also wants the chancellor to change the tax system to encourage more longer-term rental property over short-term holiday lets.
It points out in April the final phase of reducing mortgage interest relief for landlords to the basic rate of income tax will be completed.
But this measure does not apply to furnished holiday lets, which has encouraged the removal of properties from the long-term rental market for use as short-term holiday lets.
Beadle says: “To be taxing long-term homes to rent less favourably than holiday lets is simply bizarre. It completely undermines efforts by the government to encourage the provision of long term, secure housing.”
The NRLA chief executive adds: “It is time for the government to realise that its tax policies have created a shortage of rented housing. This can only mean higher rents and reduced choice for renters. This is not going to do much for the levelling up agenda.”
