PropertyInvesting.net: property investment ideas, advice, insights, trends
Propertyinvesting.net: Property Investment ideas, advice, insights, trends

PropertyInvesting.net: Property Investment News

 Property News

more news articles...

Home truths on buy-to-let


10-05-2014

Home truths on buy-to-let

David Cameron has announced that private landlords will not be able to snap up 100,000 new homes with buy-to-let mortgages. A good thing too So, it’s finally happened. A major UK political party has publicly committed to reigning in the buying power of private rented sector (PRS) landlords in the housing market. In research the Strategic Society Centre published last year, we were able to dispel a few myths around PRS landlords.

They actually represent a very small proportion of the population, so shouldn’t be feared by any political party. They are also far, far wealthier than the average homeowner in the UK, let alone the average tenant. We also highlighted the detrimental impact of the massive growth of the PRS sector over the last decade, for example, for long-term fiscal sustainability (more people arriving at retirement paying rent, and falling back on state support for rental costs).

There’s been a few whiffs of a change of attitude from the Conservative Party for a while, notably London Mayor Boris Johnson taking aim at London developments bought off-plan by overseas ‘oligarchs from Planet Zog’. Now, however, the prime minister has recognised both that reigning in the buying power of PRS landlords is a good thing for public policy, and there’s even political capital to be made from doing so. Building on our proposal for a ‘new-build buy-to-let mortgage moratorium’, the PM has announced a future Conservative government would build up to 100,000 new homes that buy-to-let landlords would be prevented from snapping up. This is an important moment, as it directly contradicts the messages from lobbyists for the PRS landlord sector who suggest that the growth of the PRS is a good thing for society. Some vested interests will inevitably bemoan the PM’s announcement, and attempt to stoke fear that removing PRS landlords will cut the development of newbuild homes. With the UK’s gummed up planning system, where new supply has no relationship whatsoever to demand, this is ultimately nonsense.

Others will warn that first-time buyers purchasing such BTL-free properties may ‘flip’ them on by selling them quickly on to private landlords. This is a risk, but a small one, and it’s not too difficult to think of measures to combat such behaviour. So, what next? With just over six months to the election, this is an exciting moment as all the political parties could now aim for the votes of those locked-out of home-ownership, bidding up the PM’s announcement on new-build homes for new homeowners. What should the politicians be thinking about? First, the next government should get mortgage lenders lending to homeowners rather than BTL landlords. The way to do this is simple. Start high, but incrementally lower a cap on the proportion of any institution’s mortgage lending that can take the form of buy-to-let lending. Implemented gradually, such a move would not undermine the housing market, but would help the UK climb back up the international league table for rates of owner-occupation.

Second, the parties should commit to a review of the financial incentives and investment returns available to private landlords via the rental sector. For example, if we want PRS landlords to shift their wealth into more productive investments than bricks and mortar, is it time to think about increasing the capital gains tax charged on homes let out in the PRS? In the end, the PM’s totemic announcement on BTL landlords shouldn’t be a surprise. It is middle-income earners who are now locked out of owner-occupation, and any party serious about boosting first-time buyers and home-ownership will inevitably have to take measures to reign-in PRS landlords. Building new homes will never be enough if they are simply sold as BTLs. The Conservative Party’s announcement is an important first-step. James Lloyd is Director of the Strategic Society Centre. You can download the Centre’s research on PRS landlords here

See more at: opinion.publicfinance.co.uk/

back to top

Site Map | Privacy Policy | Terms & Conditions | Contact Us | ©2018 PropertyInvesting.net