Tax changes will increase rents for tenants

July 25, 2016 12:03 AM

A new report from the TaxPayers' Alliance calls on the government to undertake real reform to tackle the housing shortage in the UK. Successive governments have avoided meaningful reform, instead focusing on tinkering around the edges which has only served to worsen the situation and drive up prices.

Recent tax changes will also drive up rents. The recently implemented 3 per cent Stamp Duty additional homes surcharge and new restrictions on finance cost relief relief will also advantage richer prospective buyers at the expense of poorer tenants.

Further, the TPA renews its call for the abolition of Stamp Duty, an unfair tax which stops people from buying their own home, settling down with a family, moving for work or downsizing. It makes the dream of home ownership ever more distant for millions of families.

Click here to read the report in full

Key findings:

  • The 3 per cent stamp duty additional homes surcharge will help prospective buyers but it will hurt tenants in rented accommodation
  • The restriction of finance cost relief for individual landlords will also advantage prospective buyers at the expense of tenants
  • Both policies will distort housing markets, with implications for incomes, employment and overall welfare
  • These tax hikes make Britain’s complex tax system even more complicated and distort ownership structures
  • Other local policy choices such as increasing the cost of houses in multiple occupation (HMO) licences and introducing landlord licencing schemes will hit tenants
  • Existing owner-occupiers taking advantage of lower house prices to consume more housing will tighten supply conditions in the lettings market, raising rents

Summary of recommendations:

  • Cancel the additional homes stamp duty surcharge and restrictions on finance cost relief
    These are regressive measures which add complication to a hugely complex tax system, hinder labour mobility and are economically damaging
  • Halve all stamp duty rates immediately with a view to abolishing it entirely
    Stamp duty is a disastrous and unfair tax which leads to the misallocation of housing stock and leads to lower incomes and higher unemployment than necessary. It doesn’t even raise much revenue, once dynamic effects are fully accounted for
  • Reform planning restrictions to declassify some green belt land and allow taller, denser construction in urban areas
    Pressure needs to be taken out of the housing market by making land available for development less rare and less expensive to build on. Declassifying just 5 per cent of the green belt around London would allow the city to expand by almost a sixth

Jonathan Isaby, Chief Executive of the TaxPayers' Alliance, said:

"For decades politicians have failed to tackle the root causes of the housing crisis: a chronic lack of supply. What's more, Stamp Duty is still punitively high and gimmicky tweaks to the tax system will ultimately end up penalising tenants and increasing rents. The new Chancellor should now seize the opportunity to drastically simplify and reduce property taxes as well as liberalise planning restrictions, which prevent huge swathes of land from being built on for no good reason at all."

TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)

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