10,000 signatures – Government to respond

That is good, we should never give up this fight for justice.

Overnight I received the usual tosh from the government. Sick already from reading it: The Government has responded to the petition you signed – “Reintroduce full mortgage interest relief and drop the 3% stamp duty surcharge”.

Government responded:

Higher SDLT on additional dwellings and restricting finance cost relief seeks to support first-time buyers and level the playing field for homeowners. Neither measure is expected to impact rent levels

The Government introduced changes to finance cost relief as part of a package of measures at Summer Budget 2015 to help reduce the deficit and rebalance the economy. By restricting landlord’s finance cost relief to the basic rate of income tax we are helping to reduce the advantage landlords may have over homeowners in the property market. Income tax relief for finance costs is not available to ordinary homebuyers. It is also not available to those investing in other assets, such as shares, so we’re helping to reduce the distortion between property investment and investment in other assets.

Previously, landlords could get relief on their finance costs at their marginal rate of income tax. By restricting finance cost relief to the basic rate, all individual landlords will receive the same rate of income tax relief on their finance costs.
Landlords can still claim income tax relief at their marginal rate of tax on day-to-day running costs incurred in letting out a property, such as letting agent fees and replacing furniture. Finance costs are different to other expenses as having a mortgage allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without it.

Using actual self-assessment data, HMRC estimate that only 1 in 5 landlords will pay more tax on their property income because of this measure. We appreciate that some of these landlords may face difficult decisions. This is why the government has chosen to act in a proportionate and gradual way. Basic rate income tax relief will still be available on all landlord's finance costs, and the government announced this change almost two years before its implementation. The restriction, introduced in April 2017, is being phased in over 4 years. This gives landlords time to adjust to the changes.

Given that only a small proportion of the housing market is affected by this change, the government does not expect it to have a large impact on either house prices or rent levels. The Office for Budget Responsibility (OBR) also expect the impact on the housing market will be small.

In April 2016, the Government introduced higher rates of Stamp Duty Land Tax (SDLT) for those purchasing additional properties. While it is right that people should be free to purchase a second home or invest in a buy-to-let property, the Government is aware that this can impact on other people’s ability to get on to the property ladder. The higher rates are part of the Government’s commitment to support first time buyers. Since the higher rates have been introduced, over 500,000 people have bought their first home, and first-time buyers make up an increased share of the mortgaged property market.

At Autumn Budget 2017, the Government announced further changes to permanently increase the price at which a property becomes liable to SDLT to £300,000 for first time buyers, with first-time buyers purchasing homes worth between £300,000 and £500,000 saving £5,000. This relief means that 80% of first-time buyers will not pay SDLT, and 95% of first time buyers who pay SDLT will benefit from the change. Since its introduction, 69,000 people have benefited from the relief. Over the next five years, this relief will help over a million first time buyers getting onto the housing ladder.

The Government has also taken wider action on housing to help renters get a fair deal and to address homelessness and rough sleeping. At Autumn Budget 2017, the Government committed to £2 billion of extra funding for affordable housing, including for social rented homes, bringing total investment in the Affordable Homes Programme to more than £9 billion. The Government has also allocated over £1.2 billion by 2019/20 to help reduce and prevent homelessness and rough sleeping and is implementing the Homelessness Reduction Act, which will ensure that more people get the help they need earlier to prevent them from becoming homeless in the first place. (end of part 1)

part 2: "The Government aims to halve rough sleeping by 2022 and eliminate it by 2027, and has set up a Rough Sleeping and Homelessness Reduction Taskforce to develop a cross-Government strategy to work towards this commitment.
HM Treasury"
Until they burn their fingers soo badly that people will be sleeping in front of the parliament, they do nothing.
I wonder if others already recei ved the same reply? Not a great start of Bank Holiday Weekend!

Sounds like it has been written by someone with a hatred of landlords.

It also shows how determine they are to see this through to the bitter end, leading to higher rents, increased homelessness and a smaller economy.

This won't end well. Stifle entrepreneurs at your peril.

I am quite worried about this legislation. With my current portfolio all of my properties will be underwater come 2021, so I think I need to liquidate them immediately - though this is going to be tough given current falling market conditions in London (where they are). I keep reading that we are going to be able to raise rents to compensate for this tax, but I am not sure that we will be able to. Only buy-to-let owners will be forced to raise rents - the rest of the market doesn't have to and so it will be harder for us to find tenants as we are (forced to be) charging more. I am also confused by the idea that selling all the buy-to-let properties will mean that the private rental sector will have a shortage. I'm no economist! but if I sell my properties to someone who was renting then doesn't that mean that supply *and* demand go down? Am I getting this wrong somehow?

Reply to the comment left by James at 28/05/2018 - 12:21
There's been a fair bit of notice for this, no need for a panic sale for most landlords. I've already deleveraged/restructured to be unaffected come 2021.

The idea that landlords who aren't forced to increase rents won't also jump on the bandwagon is a novel one. I certainly will be doing, this is a business after all.

No idea how you come to the conclusion demand will be falling. UK population projection set to increase by 3.6M over the next 10 years, many (most?) of them will be renting.

"I'm no economist!"
Clearly.

Reply to the comment left by James at 28/05/2018 - 12:21
Hi James,

I think you joined the forum about 3 years too late.

Where about in London and what is your LTV and how long have you held them?

Unless you are a recent entrant to the London market, you should be able to sell at a profit. Saying that, to sell easily in London you need to offer a fairly hefty discount. Gone are the days when you could sell over a weekend above asking price!

Reply to the comment left by Monty Bodkin at 28/05/2018 - 13:38
"The idea that landlords who aren't forced to increase rents won't also jump on the bandwagon is a novel one. I certainly will be doing, this is a business after all."

I suppose it all comes down to supply and demand. There have been a *lot* of new developments in London recently, so many new towers of flats. And rental yields seem to be flat or even declining (if you take inflation into account). I'm not sure that the market dynamics will work out as you say, given that renters seem to have some choice at the moment. It is a market after all. Prices can't be fixed.

Reply to the comment left by H B at 28/05/2018 - 13:39
South London / 2 years / 75%. Yes indeed, the London market is on the brink of collapse. Prices are going down, it's terrifying! If the price goes down by a quarter I think that the bank will liquidate my assets :-\. I think that only First Time Buyers are buying at the moment. The equity loan and all that stuff should help me unload I think.

Reply to the comment left by James at 28/05/2018 - 14:14Even if you weren't aware of S24 two years ago, the underwriters certainly were.

It is highly unlikely they would have lent to a new landlord on a portfolio of properties who's rental income would be underwater by 2021.

About as unlikely as your 25% price crash!