The changes to the taxation of the private rented sector are based on evidence that is threadbare at best and nonexistent at worst. This is no way to make policy and could have a devastating effect on tenants and housing supply.
This week the Government began the process of restricting mortgage interest relief to the basic rate of income tax. Landlords will also be taxed on their turnover, rather than their profit, unlike any other business.
Ministers have used different arguments to support these measures. One has been that they are necessary to prevent a buy-to-let bubble threatening the economy. Yet landlords are not borrowing recklessly.
The number of buy-to-let mortgages is falling, as are the total amount being borrowed and the number of mortgages that are in arrears. Various surveys have found that landlords have plenty of equity in their properties.
Another line of argument is that landlords have enjoyed a tax advantage. But the respected Institute for Fiscal Studies has said that the tax system “is not, and was not, even before the recent changes, more generous to people buying to let”. Buy-to-let landlords, unlike home owners, pay both income tax on the returns from their properties and capital gains tax when they sell.
The Treasury also argues that the new tax will prevent landlords from grabbing homes that could go to first-time buyers. It has been unable to produce any evidence to support this position. The London School of Economics said last year that “only a minority of sales to landlords involved bids from both types of buyer”.