The severe new mortgage tax laws introduced by Chancellor George Osborne in June relied on the outdated preconception that landlords and other homeowners are in a constant state of conflict, and that property investors needed knocking down a peg or two to create more of a “level playing field.” Financial writer John Stepek describes Osborne as “canny” for latching onto this subject and predicts that he will make additional rulings with regards to the property sector in the future, presumably to win over frustrated Generation Rent-ers whose feelings on being “locked out” of the market are well-known.
But there are some who would argue that landlords and tenants who wish to buy a home are not in direct competition at all. “There are problems in the housing market and yes it is difficult for homeowners to buy, but landlords are not the problem,” says Cathy Colston, a full-time landlord with 20 properties. “Almost all the properties I want to buy are not the same as those wanted by owner-occupiers. People buying their own home are largely guided by their hearts – it’s about where they want to live. I am buying very much with my business head, and looking at potential returns.”
Another such landlord whose portfolio provides valuable, much-needed housing to tenants without depriving other would-be homeowners is Graham Chilvers. He owns 75 properties, but claims that none of them would have made suitable starter homes for families as each and every one of them required significant renovation and rebuilding, which he carried out himself. “The Government justifies its attack on buy-to-let by saying landlords have an unfair advantage over people wanting to buy their own homes,” he says, “but no homebuyer was competing with me on any of these properties.”
“The real problem preventing people from buying their own homes is the lack of mortgage finance,” adds Colston. “The Government’s argument that this tax change will make a level playing field between investors and ordinary homebuyers is flawed.”
While existing landlords have previously been able to secure mortgages through their own names, it is thought that in the future, this will take place via a limited company structure, making the entire process of buy-to-let unnecessarily complicated and more expensive. The new tax laws mean that landlords will be taxed on their rental income, not on their actual profit, which may well deter newcomers to the private rental market, and could even drive some landlords to sell off properties in their portfolio in order to be able to pay off mortgages on others.
Was this Osborne’s intention all along? To force landlords out of the market to make way for domestic homebuyers, rather than sourcing an alternative solution? If so, he has neglected to consider the millions of Britons who cannot yet afford to buy a home, and rely on private landlords to put a roof over their heads.
George Spencer is CEO at Rentify.