Triple Whammy Tax Attack on landlords proposed for Budget

A controversial new report demands that the government uses next month’s Budget to sharply increase tax burdens for landlords.

The Joseph Rowntree Foundation’s report wants, amongst other things:

- A higher Stamp Duty Land Tax surcharge on investor purchases to give an advantage to those seeking to buy a home to live in;

- The removal of the current Rent A Room tax break on short-term lets, which currently give landlords a £7,500 tax free allowance on rents, to discourage landlords from switching from long-term lets to other types of rentals; and

- Consideration to scrap council tax and Stamp Duty and replace with an annual property tax paid by the owner (or, the landlord) rather than the resident.

The JRF claims the housing market is facing a ‘worst of all worlds’ situation as rising interest rates and high inflation create the conditions for a housing market freeze.

It paints a picture of a market “where building stops, transactions stall, cash rich investors swoop in to buy up properties, rents continue to spiral and vulnerable homeowners are stuck in unaffordable homes.”

It urges the government to act in a way which will not only get the market moving, but “start to put right the problems which are excluding younger generations from owning their own home or finding genuinely affordable homes to rent.”

The authors describe a sensationalised interpretation of the current situation and forecast “a collapse in housebuilding” as housebuilders mothball sites to avoid selling in a falling market, and existing owner avoiding going to the market until prices rise.

The foundation claims to see “investors swooping in to buy up homes for holiday lets or short-term lets using cash, while first-time buyers relying on mortgage finance are frozen out.”

It therefore wants the March 15 Budget to include these measures: 

- Keep housebuilding going by empowering and funding councils, housing associations, charities and community groups to acquire stalled sites from developers and redesign schemes to include more affordable housing, which can be built quickly as prices fall;

- Increase the Stamp Duty Land Tax surcharge on investor purchases to give an advantage to those seeking to buy a home to live in;

- Remove tax breaks on short-term lets, which currently give landlords a £7,500 tax free allowance on rents, to discourage landlords from switching from long-term lets to other types of rentals;

- Levy council tax on homes in new developments 18 months after planning permission has been granted whether built or not;

- Support households struggling with higher costs by unfreezing Local Housing Allowance so it meets the cost of local rents and establishing a new version of the Mortgage Rescue Scheme launched in the wake of the Global Financial Crisis, which would fund social landlords to buy the homes of mortgaged homeowners in distress.

And in the longer term it wants the government to replace council tax and stamp duty with an annual property tax paid by the owner not resident and launch “an ambitious new programme of powerful development corporations to lead a new generation of high quality, mixed tenure developments.”

It also wants councils to have the power to declare Housing Pressure Zones where they can set the rules about who can buy properties in particular areas. It says: “This could be used to restrict investor activity where high demand for second homes or low demand is fuelling exploitative lets.”

Darren Baxter, a policy adviser at the foundation, says: “We are facing a housing downturn that will put vulnerable families and our country’s economic prospects into serious difficulty. 

“The government must confront this head on and recognise that past approaches will not work this time.

“Instead, the government must tackle both the short-term fallout from the housing downturn we find ourselves in and the deeper problems within our housing system. 

“By acting now, and doing both at the same time, government will ensure we are better placed to come out of this downturn with a fairer, more secure and more affordable housing system in reach.”

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