Axe the Tenant Tax Important Update – Summary of meeting with the Housing Minister

Update on Landlords Fight Back #TenantTax 

Following our meeting with the Housing Minister, Gavin Barwell, on Friday 9thSeptember, we wanted to share this detailed update with you.

We thank him for making the time to see us.

In attendance were:

– Gavin Barwell (MP and Housing Minister)

– Graham Lyon (Croydon resident and landlord)

– Steve Bolton (Axe the Tenant Tax and Platinum Property Partners)

– Gary Elliott (Corby based Landlord and Hunters Estate Agents)

– Martin Skinner (Croydon/London based developer/Inspired Assets)

Firstly a HUGE thanks to Graham Lyon for making this meeting happen and to Gary Elliot for contacting us and recommending that Axe the Tenant Tax were represented at the meeting. And thanks to Martin Skinner for providing the Croydon Developer angle and insights.

To start with, we were impressed by how Gavin handled the meeting. He took notes, listened intently and asked clarifying questions when he felt he needed to. At the end, he summarised well, asked us to rank in order of priority/concern all of the issues that we discussed and then he put his points across well. At times he agreed with us and when he disagreed, he explained his reasoning.

He also spoke off the record with views that cannot be shared but left us with the impression that he understood the situation and was ‘unofficially’ supportive of many of our points of view.

Judging him on this meeting alone, he has excellent communication skills, a good understanding of the issues, a smart brain and comes across as an impressive man. His offices were frugal (good that they are not overspending tax payers’ money) and his two staff were very helpful, polite and efficient.

Gavin is on public record recently (via Twitter) speaking out in support of private landlords by saying:

“Astonishing attack by @jeremycorbyn on private landlords who provide homes for millions of people. More to do but EHS (English Housing Survey) shows standards rising”.

All of the above comments must be put in the context that we have very limited experience meeting with and dealing with politicians, so it is hard to make comparisons in that context. This was in fact the first ever meeting with a current Cabinet Minister for all of us.

However, from a business comparison point of view, I would rate the way that Gavin communicated and managed the meeting to be of a very high standard in a commercial setting.

The main points we put across during the meeting are as follows:

1. The unfair and retroactive nature of Section 24 and the damaging consequences to tenants, landlords, suppliers, developers and the housing market. This was obviously the key focus of the discussion.

2. Our Judicial Review and that our preference would be for the Government to remove the retroactive nature of Section 24 as quickly as possible (i.e. apply it only from April 2017 onwards), as opposed to having to fight us in the courts. (This then leaves future property purchases open to either being affected by Section 24 and people can go into this with their eyes wide open, or they can be more serious about their property business and buy through a Ltd company). We made it clear however that we and our supporters will take the Judicial Review as far as the process allows and are committed to the cause.

3. When costs rise for the supplier in most businesses, ultimately the end user shares in footing the bill. We know he is supportive of this point as he is on record previously making this statement about Landlord licensing: “It doesn’t take a genius to work out what will happen if this scheme goes ahead: landlords who make the payment will simply pass the cost on to their tenants. Lest I be accused of scaremongering, the Council admits this, though the admission is buried 19 pages into its report ‘tenants may be impacted by an increase in their housing costs as landlords seek to pass on some or all of the costs of licensing through higher rent levels’.” Gavin Barwell MP (on Croydon Council’s landlord licensing scheme 2014).

Gavin shared that the tax changes and policies that we have seen over the last 12 months, stemmed from the Bank of England’s comments regarding preventing another housing bubble and that buy to let landlords would be more likely to default, and in a downturn, make the situation worse. We made the points that there were far more simple and honest ways to address this concern by changing lending criteria. What has in fact happened is that a sustained tax grab has been initiated and only recently are we now seeing some of the lending criteria being adjusted. Furthermore, we have had personal experiences with the Bank of England and are not confident that they have a full and broad understanding of the sector from a commercial point of view.

We talked about the impact that Section 24 will have on rent rises to tenants and Gary Elliot, a Corby based landlord and part of the Hunters letting agent group, informed Gavin that he had already increased rents by 5% in anticipation of the rent rises, and plans to do so for every year for the next four years. Previously he had not increased rents for existing tenants for six years but is having to do so because Section 24 will increase his tax bill from £20,000 to £45,000 per year and if he doesn’t increase rents, he will have to sell and tenants will have to move out.

Gavin seemed genuinely surprised that the tax increase would be so high for Gary and others like him. We made the point that the more people you provide homes for, the more likely Section 24 will have a devastating impact. It is punishing exactly the wrong people (unless your goal is to raise rents and reduce the number of homes). At this point Gavin asked if Section 24 was removed, would Gary put his rents back down? Gary answered honestly by saying no. We made the point that the failed Irish experiment resulted in a 50% increase in rents over a three year period before they scrapped them and many of those rents did not go back down afterwards. We followed this by saying that it was therefore in the Government’s and housing market’s interest to change Section 24 as soon as possible, otherwise rents will rise aggressively over the coming years, and they are unlikely to go back down. We showed him a Guardian article from that newspaper on that day, stating that rents have now reached record levels and he said he had also read it that morning. We said that this was just the tip of the iceberg and there is far more and far worse coming.

Gavin was interested in the importance of the supply of new homes and how we think Section 24 would impact this situation. We were in common agreement that the lack of supply of new property is the fundamental cause of the housing crisis and this is a key issue for him to address in his role as Housing Minister. There is a common consensus that the bigger house-builders are going to continue to build at similar levels as in the recent past and no game-changing solution to the crisis will be forthcoming from that sector of the market.

Build to Rent is a new development that has, in the USA at least, had a genuine impact on the supply of new homes, especially in the more densely populated areas. We agreed that it was not an ‘either/or’ situation, both private landlords AND build to rent type developments and developers, were part of the solution. Gavin mentioned that he had visited Pocket Living (https://www.pocketliving.com/) and appeared to like the possibilities offered by these types of innovations in the sector. Similar properties are offered by Martin Skinner’s Inspired Assets.

We made it clear that buy to let investors were critical to supply as they are one of the few forms of buyer groups who are willing and able to put down deposits on developments at an early stage and before mortgage finance is available. First time buyers hardly ever do this as it is a golden rule in property that you don’t exchange or put down large non-refundable deposits until you have mortgage offers in place. However, experienced investors are often comfortable doing this as they have a different risk profile. From a developers’ perspective, buy to let investors’ deposits are often critical in achieving the financing they need to commence the build process. And properties bought by buy to let investors not only create new homes for tenants to live in, but when they are sold in future, some of them will end up in the hands of first time buyers.

Gavin shared that the smaller and medium-sized developers, like Martin Skinner and his company Inspired Assets, are an important part of the solution.

We also made the point that more and more people are sharing properties for both affordability and social benefits. We explained that Platinum Property Partners have purchased 800 properties and turned these houses into 5,000 new units of high quality affordable accommodation for key workers and working professionals by making them HMOs. This proved the point that existing stock, when converted into quality HMOs, can also create more places for people to live, and more affordably than living alone. House and flat sharing and smaller apartments are part of the solution. In fact SpareRoom, who kindly supported us by providing some research data and comment for the meeting, suggest that there are 20 million empty bedrooms in the UK and if just 5% were of them were rented out, there would not be a housing crisis.

We discussed the retroactive nature of Section 24 (it is not retrospective in legal terms). Why did the Government bring something in that changes the rules for people who made decisions based on certain financial assumptions and now they have had the rug pulled from under them? Gavin mentioned that as a principle, tax changes should and are normally forward looking, but there are some exceptions. He was not willing to comment further but was certainly nodding and cannot dispute that it is normal and sensible business practice to make policy changes that affect the future and not the past.

We discussed the fact that there was no consultation on Section 24 and whilst he could not comment on the exact reasons for this, he did say that this is often the case with other policies. He made an off the record general comment that we understood, but it is not one that we can agree with.

Gavin also understood that London was a ‘bubble’ in the sense that the issues surrounding housing in London are far different than it is in all other parts of the UK.

At various points we had short break-off discussions about Capital Gains Tax, licensing, permitted development rights, space standards and other housing related matters. However, the crux of the meeting was Section 24 and all roads led back in that direction.

Next Steps

In terms of next steps, Gavin provided us with some useful recommendations on areas that we should be focused on and the arguments that will give us the most leverage to change opinions. We did not go into the meeting expecting his public support for our legal challenge or a Government u-turn, as this is something that clearly in his role he cannot give.

Like all cabinet members, he is expected to support the Government’s policies and decisions, even when they may personally disagree.

He was left knowing that our proposed win-win solution was that Section 24 gets changed so that properties purchased in individual names, prior to April 2017, are not affected by the legislation.

Whilst we were initially resistant to any form of ‘compromise’ solution when we started out on our Section 24 Judicial Review journey, we soon came to see the logic in offering the Government a way to partially save face and still give us the main objective that the vast majority of our supporters are rooting for. This point of view is not only one shared by the other landlord organisations but also lobbyists and our expert communications agency, Westbourne, who have a proven track record in helping to overturn or dilute bad tax policies. It would be the smart and practical solution and is our central focus alongside the Judicial Review.

A follow up meeting was discussed with a site visit to one of Martin Skinner’s Croydon developments, Green Dragon House. We are positive this will happen and can continue our dialogue again. We left behind a printed PowerPoint presentation that summarises the key points effectively and in simple terms and this will be shared in the very near future, so that our supporters can use it as the basis for meetings with their MPs.

Action Steps

In terms of how you can help us build on the positive outcomes from this meeting, here is what we would suggest and be grateful if you can support:

Meet your MP – Steps on how to do this can be found in the link below on this excellent page produced by the RLA. In addition, we would suggest taking a printed copy of the PowerPoint/PDF presentation that we will soon be making available as a leave behind and to use as a guide for you during the meeting if you would feel more comfortable having a clear structure to follow. Maybe consider going with one or two others – a fellow landlord, letting agent or a tenant who can talk about how rent rises will impact their ability to get on the property ladder or the fact that if they do not aspire to this, that they are happy renting, always see themselves doing this and want affordable and good quality accommodation like you provide.

http://www.rla.org.uk/landlord/lobbying/…/meet-your-mp.shtml

Public attendance at Court Hearing in London on Thursday 6th October from 11.30am – Our 90 minute court hearing, where Cherie Blair QC MBE and our expert legal team will make our case for a Judicial Review of Section 24, will be open to the public. We have managed to secure a larger court room, but interest from supporters means that capacity is already oversubscribed. There may be an opportunity to request an even larger space, but this is unlikely. If you haven’t already registered your attendance via the Facebook page, please email info@tenanttax.co.uk to be added to a waiting list.

Join us for expert panel debates and meetings at the Property Investor Show, London ExCel, Friday 7th and Saturday 8th October – Meet us personally and join in a seminar or panel debate and Q&A that we will be hosting at the Property Investor and Homebuyer Show. Tickets are free and we are expecting a large turnout from our supporters. We will have a stand at the show that the organisers have very kindly provided to us free of charge, so please show your support to them and us by coming along. The NLA have already confirmed that they will take part in the panel debate on both days, with their CEO Richard Lambert attending and taking part personally on the Saturday. We await final confirmation from the RLA of their attendance and participation also on the panel debate and they have already indicated positively that they will be taking part.

The Axe the Tenant Tax umbrella campaign now represents over 100,000 landlords through various organisations and who are estimated to house over 1 million tenants. Our cause and campaign is growing in both size and stature as every week progresses. Our outcomes continue to be crystal clear; overturn Section 24 via a Judicial Review, or get the Government to remove the retroactive nature of Section 24 so that past property purchases are not included. We will continue to grow and expand the inclusive umbrella campaign and continue to work with and attract more coalition partners.

A massive thank you to every individual, large and small, who has supported us so far. Please keep doing so and spreading the word.

We hope this update is of value and as always, welcome your comments, questions, opinions, ideas and positive words of both encouragement and criticism.

Best regards

Steve Bolton and Chris Cooper

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