When George Osborne announced he was removing mortgage interest tax relief in 2015, landlords were in an uproar. Many experts claimed that tax cuts would make it impossible for landlords to make a profit, which would drive down the supply of rental housing and increase rents.
“Landlords will seek to recoup their costs by hiking up rents. As a result, tenants will have to save for longer to be able to afford a deposit for a house, as more of their income will be eaten up by rent,” said the Residential Landlords Association at the time.
It’s been three years since the divisive tax grab by the chancellor. Generation Rent has conducted research into the effect of Osborne’s taxes and has concluded that rents have not been pushed up. They say that when rents are adjusted to take inflation into account, they have actually fallen by 2.8%.
“There is, therefore, no evidence that a reduction in the supply of rented homes has pushed up rents,” says Dan Wilson Craw from Generation Rent.
First-Time Buyers Increase
In his opinion, landlord taxes have had the desired effect. The number of first-time buyers has increased by 21% in three years while the number of landlords has fallen.
Figures published by the English Housing Survey indicate that the private rental sector is still around 20% of the housing market. However, the full effect of the phasing out of mortgage interest tax relief has not yet been fully realised. That won’t happen for another three years.
In the meantime, the chancellor is under pressure to relax taxes against the private rental sector. Giving a tax break to landlords who sell properties to sitting tenants is one such idea being floated in parliament. With the next Budget just around the corner, we won’t have long to find out what Mr Hammond decides to do.