Landlords under attack: A bad budget for the housing industry

16th March 2016

Despite the Conservatives claiming to be the party of home owning aspiration, many were left disappointed by the absence of any robust or meaningful housing initiatives or a dilution of George Osborne's previous attacks on property purchasers, by way of stamp duty and tax relief changes today.

This Budget may prove to be a missed opportunity in the Government’s race against time to meet its own housing targets.

Richard Pike, Phoebus Software sales and marketing director, says “For a budget that claims to be for the next generation there was a disappointing lack of definitive measures to improve what the Chancellor admits is a failure in the UK to provide new housing. If we are the builders, as Mr Osbourne states, what exactly is the government doing to help?  The introduction of a more simple way for the younger generation to save is of course welcome, but if they are saving for houses that don’t exist how is this beneficial in the short term?

No doubt in the coming months the details of how the government intend to speed up the planning system will emerge, but how effective these measures will be is questionable.  As far as the budget today is concerned it has left us asking many more questions than it answers – exactly how high up the priority list is the UK’s housing problem?”

David Cox, managing director, Association of Residential Letting Agents (ARLA), said: “This is now the third Budget which directly attacks landlords. The sector has been punitively taxed, with stamp duty on buy-to-let properties, mortgage interest relief and now capital gains tax changes. It’s an outright assault on the sector!

Every other sector has been offered a tax break – yet there is nothing here to help the private rented sector, including landlords - and most importantly tenants - who will see rent costs rise to subsidise the taxes that landlords pay on property. The government talks about wanting to help the younger generation get onto the property ladder, but with the changes announced today the supply of available property is bound to decrease, and as a result rents will rise.

In November, when Mr Osborne announced an increase in stamp duty tax on buy-to-let (BTL) properties, we described this as a catastrophic move. Today’s news that larger investors will also have to pay the tax is even worse. Professional landlords – those who typically own more than 15 properties – play a vital role in providing rental stock to the market, and providing the army of renters we have in this country with housing. Our members forecast that the supply of BTL properties will dwindle when the new tax comes in to effect, and this news means that supply will fall even faster and harder. We’re already in a position where demand out-strips supply and as supply falls, rent costs rise, meaning the goal of home-ownership falls even further out of reach for most of the country’s renters.”

Landlords exempted from Capital Gains cuts

Richard Lambert, Chief Executive Officer, National landlords Association (NLA), said: “The Chancellor said that this government would tax the things it wants to reduce not the things it wants to encourage.

On that basis, it’s clear he does not regard ordinary people putting their own money into providing homes as worthwhile.The steady upward ratchet of taxation on landlords over the past year shows that George Osborne is determined to bear down on the private rented sector, but he still depends on the tax revenues he expects to pull in from them.

The NLA called for a short term easing of CGT to allow landlords to restructure their portfolios or to exit the market altogether but it appears that however much he wants us out, he can’t afford to allow us to leave.”

Richard Sexton, director of e.surv chartered surveyors, said: “First-time buyers may be feeling disappointed by today’s lacklustre budget announcement, which failed to address the lack of housing supply, again skirting over any substantial changes to planning reforms. The same problems will remain – not enough properties are coming onto market, not enough new homes being built – and its first-timers who are seeing future dreams of a home drifting further out of reach.
Although the Help to Buy ISA has proven popular, many are finding it increasingly difficult to save. The new lifetime ISA has the potential to increase savings ability – but the average deposit in January stood at £28,393. By this measure it would take an individual first-timer 6 years in order to save this amount. On the Help to Save Scheme it would take 32 years. And across these timeframes, house prices will keep on climbing across the country. Time is not a luxury that first-timers wanting to move to start a family or settle into a new home may have.
The North East boasts the lowest average house price in England of £108,395. As the Northern Powerhouse momentum continues however, boosted by HS2 and the newly announced HS3 this first-time buyer haven could also become an unreachable location for many. The government needs to do more to tackle house prices – the next generation of homeowners are being overlooked.”

Russell Quirk, eMoov CEO and former Brentwood First councillor,commented: “A very disappointing budget from a property point of view and for UK buyers and sellers. The capital gains tax reductions, whilst bold, are a missed trick and a kick in the teeth for those second home-sellers, that will not benefit from a reduction in capital gains tax on their property sale. This was hardly a budget to assist hard working people with more than one property, not to mention Mr Osborne’s total failure to address the issue of housing supply that has been touched upon in previous budgets.

It’s startling that the provision of much-needed housing supply did not seem to be referred to at all, despite rhetoric in previous budgets seemingly encouraging public land to be turned over to address the housing supply issue.

In previous budgets, Mr Osborne has enjoyed referring to fixing the roof whilst the sun is shining, may I respectively suggest that he turns his attention to building some roofs whilst the sun is shining instead.

The move to apply new stamp duty changes to larger institutional investors, as well as smaller Buy to Let landlords, is a fair one, although I believe this was probably an oversight from last year and nothing to shout from the rooftops about.

I think the move to mirror the residential stamp duty slice system for commercial properties is also a fair one, but again, not a move that will benefit the man on the street as it were but more the larger commercial developer.

However, the changes to business rate thresholds is a very welcome one indeed and no doubt one of the big headlines of the budget, to help small business’ which of course as a Conservative, surely George should be doing.”

John Phillips, group operations director of Spicer Haart and Just Mortgages, had this to say: “Despite George Osborne’s ‘we are the builders’ mantra, he admitted that the country’s failure to build more housing has been identified as a major problem.

Although he said the focus will be on speeding up the planning system, he gave very little explanation as to how this will actually be achieved, which raises more questions than it answers.

Osborne also re-stated the residential stamp duty reforms that will come into force next month and confirmed that large investors with more than 15 properties in their portfolios will be covered.  However, until real measures are taken and building activity increases substantially, the long-term issue around demand for houses and the lack of housing supply means affordability will remain a significant challenge.  It is therefore crucial that more work is done to get the homes built that the growing population desperately needs, and I’m surprised that his key priority wasn’t housing.”

Brian Berry, Chief Executive of the FMB, said: “The Government has set itself a target of a million new homes by 2020. That is rightly ambitious, but the continuing gap between what’s being built and what needs to be built makes hitting that target more difficult by the day. Official statistics show that annual housing completions in England totalled just over 140,000 in 2015, a long way short of the 200,000 homes we need every year to hit one million. We are nearly 12 months into the current Parliament and the Government is already falling well behind on its targets.

We recognise that the Government is working on a number of fronts to speed up the planning process and intervene to support first time buyers, and some of the measures in today’s Budget are welcome steps forward. Yet these announcements are limited in scope and won’t signal the step change that we need to see. We cannot afford to lose momentum in the battle to beat the housing crisis.”

Mark Hayward, managing director, National Association of Estate Agents, said: “The Chancellor’s announcement that a new lifetime ISA could be used to help people buy their first home is welcome news. Helping first-time-buyers (FTBs) to get on the housing ladder should be a priority for the government, limiting this to those aged 40 or under emphasises the real issues for those trying to get on the housing ladder. Our recent Housing 2025 report forecast that house prices will soar by 50% by 2025, meaning that the task of helping FTBs to get on the first wrung of the housing ladder is only set to get more difficult for many people across the UK.”

Adrian Gill, director of estate agents Your Move & Reeds Rains, comments: “The next generation of Britons looking for a home do indeed face a cocktail of risks.

From a property purchase market where canny sellers secure nearly ten percent more than a year ago, from drastically insufficient house building across the UK – and from rents increasing at ten times the rate of CPI inflation. In a sellers’ market we need a builders’ generation. Supply of housing should be priority number one. And for that reason, political punishment for professional landlords offering quality homes to rent should be nowhere on the agenda.

Help to Save is a welcome addition to Help to Buy. New rail lines and faster internet are brilliant ambitions. Jobs and wage growth are vital. But if there are not homes to live in, very little of this will be helpful – or affordable for the next generation. We still need detail on planning reforms, but these changes should be truly sweeping to have a radical impact for anyone struggling to buy, or struggling to rent.
In the UK, tackling productivity weakness means tackling housing supply. Drag from the financial crisis is being replaced by drag from serious and permanent problems with housing and infrastructure. The next generation needs homes. This generation needs to start building them. And the government must avoid making it harder for people to live in them as tenants.”

Nick Leeming, Chairman at Jackson-Stops & Staff, comments: “The UK is in desperate need of a housing policy which caters for the long-term, reflecting the future needs of a growing population and changing demand for property type and tenure, which looks beyond the next Parliamentary period. We are also in desperate need of more homes. Today’s Budget was a prime opportunity to outline a progressive policy but unfortunately housing did not take centre stage – which is very disappointing. We need more incentives, and easier processes, for small and medium-sized housebuilders to get building. The construction industry in this country saw a significant slump after the economic downturn, with many industry leaders taking the opportunity to step down. Those skills have therefore been lost and successive governments have introduced few incentives to build them back up.

Lifetime ISAs, outlined today, are another supportive measure for first-time buyers and are a significant boon for those looking to save for a home. However, this is another measure which boosts demand and today we heard very little about supply – increasing housing supply is key to easing property price growth.

There was more to celebrate in terms of infrastructure with the news that Crossrail 2 has been given the go-ahead. This is a significant boost for London’s connectivity to key areas like Hertfordshire and Surrey. With average property prices in the Capital now more than £530,000 according to the Land Registry, London is out of price for many. This new transport infrastructure helps bridge the gap by providing more commutable options. Key stations on the line are likely to see a spike in demand, and consequently property prices. Buyers should take advantage early to avoid disappointment.

The confirmation that there will be a 3% stamp duty surcharge for second home owners is a real blow – and the brunt of this change will be felt by tenants and not landlords. There was no detail given today in the Chancellor’s speech and there are many questions unanswered before April 1st. However, our analysis shows that house price inflation over the next year will absorb stamp duty costs for landlords under the new regime in eight out of 10 regions across England and Wales, so the intended deterrent effect of the new policy is limited. Where landlords don’t want to shoulder the additional stamp duty cost, this will be passed on to their tenants in the form of rent – effectively making this a tenants’ tax.”

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