Are the RLA losing the plot?

I do not want to fall out with the RLA as I think Alan Ward and his colleagues have written many brilliant articles. However, his recent article published by City AM entitled: “Why solving the country’s housing crisis means backing – not battering – landlords” contains counter-productive suggestions to Government and signals acceptance of S 24 and of the higher rate of CGT.

Alan Ward has suggested that some of the money raised by S 24 is used to …

“help finance a policy of not applying the levy where a landlord is prepared to invest in a home to rent which adds to the net supply of dwellings. This could be a new build property, converting commercial units into housing or bringing one of the over 600,000 empty homes back into use.”

However, anyone who wants to do that in future can avoid S 24 by purchasing via a Limited Company. What about those of us who will pay the levy on loans we took out to add to the net supply of dwellings in the way he describes? He will “continue to call for the changes to mortgage interest relief to apply only to new borrowing.”  That is simply not good enough!  When the RLA makes any statement about a compromise re s24, they should clearly state it should apply to new purchases and not to new borrowing. If it applied to new borrowing this could be interpreted as including remortgages on existing properties. The worst thing about s24 is its retroactive nature and how it damages existing portfolios. If it only applied to new purchases on the other hand, many of us would be very happy with this compromise, because at least any landlords who do want to purchase under the new crazy tax regime can go into it (or not) with their eyes open.

To illustrate the problem a bit further: If new lending and remortgages were interpreted as the same thing, many landlords would thereby be condemned to stay long-term on expensive and punitive variable rates or face the s24 regime. There are also hundreds of thousands of UKAR mortgages for example, many of which are due to come to term. Borrowers here have to redeem the mortgages – they have no choice – again, this could be seen as new lending and the borrower could move into the s24 regime. All that would have been achieved is a delay of however many years they have left on their term. The legislation would still therefore be retroactive. This is why we should insist on the phrase ‘new purchases’ being used.

I may have misunderstood the article, the wording wasn’t entirely clear. It could be that Mr Ward was referring only to the 3% Stamp Duty levy. If that is the case his suggestions are even more feeble and accepting of s24.

The next RLA statement I challenge is …

“in the 2016 Budget the government announced that capital gains tax would be cut from 28 per cent to 20 per cent from April 2016. It noted at the time that it would not apply to residential property in order to incentivise investment in companies over property.” 

I don’t recall that being given as a reason. If Mr Ward means shares, money only goes to a company when a share is first issued.

Then ….

“we believe that the lower rate of capital gains tax should apply where a landlord is prepared to sell a property to a sitting tenant.” 

If a landlord is prepared to sell he is prepared to sell to a sitting tenant. But how many of the latter are able to buy, and why haven’t they bought somewhere else?

Clearly the latest RLA article represents a tacit acceptance of s24 as a fait accompli; by recommending how the spoils should be spent, it also follows the Government’s perverse anti-private landlord agenda.

My questions to the RLA are:

How can any of these suggestions be fair for those of us having to pay potentially infinite effective tax rates on loans we took out, in many cases adding to the net supply of dwellings in the way you describe? This would mean we are punished for adding to the supply but that anyone new coming in would be rewarded.

Which if any of these suggestions were discussed with the new coalition between RLA, NLA, ARLA, SLA under the “Axe The Tenant Tax” banner, and if the answer is none, what is the point of the alliance? 

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