Summer Budget 2015 – Landlords Reactions

HI Appalled. Well, it has been argued that this policy if implemented will have that exact effect by flooding the market with distressed sales. So it seems to me that the BoE was saying it wanted something done, but are not likely to agree that this is the way to do it.

Until today I was hopeful that any appeal might be met with some success but now I'm not so confident, it's not looking like any of this was a badly thought out decision, they seem to have it in for landlords no matter how large or small... A friend works for one of the largest social housing groups in the UK and today they've announced to the staff that there are going to be huge cuts and redundancies. This is the message I received from someone fearful that they may be out of a job soon ... "The government budget announced a 1% rent cut per year for next 4 years in social housing. Nobody knows why they've said it other than to pacify people who's benefits they're cutting, but it amounts to 42 million per year reduction in our income. Add to that 'right to buy' that's being forced on us and we are likely to lose 50 million per year! So there are going to be cuts in all non essential things we do and redundancies but they don't know who yet. For every house we are forced to sell at below market value, we have to build a new one, with no extra funding to do so"! This all sounds like some sort of bad dream to me at the moment, property was supposed to be our future pension, if changes aren't made it could be our bankruptcy! Why tell people for years to invest pension in property only to the pull the rug from under our feet before we see the benefits!

Reply to the comment left by "Lorraine W" at "23/07/2015 - 22:43":

Hey Lorraine. Chin up! Think positive! That's the way to deal with this. Get writing letters to your MP, to the Chancellor, to ministers and tell them your story. Tell them how you invested for money in retirement. Tell them it how it is. The more letters and emails they get in their inbox and the more variety of experiences they hear about how bad this is, the better.
All the best. We're in this together.

I just went on this website http://www.landlordzone.co.uk/ and they had an article published on 17th of July where they were still completely misinterpreting this thing. I wrote a comment telling them to come over to Property118 to see the anger and reaction of those of us who understand what is going on.

Reply to the comment left by "Lorraine W" at "23/07/2015 - 22:43":

So we have cuts in social housing, taxation policies that will bankrupt much of the PRS and reduce the scale of new build development. The knock on effects of less new build development will be less development of social housing.

The biggest housing charities in the UK appear to be supportive of these measures despite the fact we already have a housing crisis. I suppose the best way to raise profile of a housing charity is for the housing crisis to escalate, or am I just being cynical?

We have a growing population and an open door policy on EU immigration.

Where is this growing population going to live?

Without wanting to sound melodramatic, this lunacy could result in civil unrest if it is allowed to continue.

As many as 5 million tenanted homes could be disrupted if the PRS is taxed as proposed.

Another collapse in property values will leave many more millions of homeowners trapped in negative equity.

No wonder the numbskull anarchists posting on the House Price Crash forum are celebrating! They seem not to have a care about the lives of their friends and families who could be affected? All they want is for house prices to crash to a point where they can buy a property which matches their ability to earn an appropriate wage for their Pea brain levels of intellect, or perhaps they even think they will be able to borrow three times their benefits to get a mortgage and buy one? It is incredibly hard to fathom the illogical motives of some people.

I don't know whether to laugh at the HPC mentality or cry about the stupidity of the politicians who have fallen for this BS, the very politicians most landlords voted into power.

The politicians MUST be made to see sense.

Goodnight
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I like the idea towards the bottom of the article about offering Landords rolled over CGT relief if they sell to first time buyers.

http://www.cityam.com/220861/bashing-buy-let-landlords-will-push-rents-and-hit-uk-economy-hard

Reply to the comment left by "James Tallis" at "24/07/2015 - 08:47":

I like the whole piece. Much more balanced tone than the 'it's a crime' arguements.

Biggest worry not mentioned is if the intention is to reduce debt generally in the BTL market - then the may not budge.

Some of the qwerks eg tax without profit, impact on benefits, CSA etc certainly all need looking at.

Reply to the comment left by "James Tallis" at "24/07/2015 - 08:47":

The rollover of capital gains idea is a great one. It will allow those of us who will be badly impacted by these changes to exit the market gracefully. This should limit losses, increase supply on the market, thus lowering property prices for FTB. The real losers here will be OO who bought recently or over extended themselves on the mortgage!

I DON'T want to sell my properties. I have enjoyed my time as a small landlord so far, mainly because I've been lucky with a succession of good, reliable tenants and won the London postcode lottery. I'm looking at similar properties in my area of SW London though and time on market is increasing, so to are asking price reductions (gradually) - I'm worried that if I wait too long I'll miss out on the optimum selling price. The more I learn about this the worse it gets!

Reply to the comment left by "Phil Landlord" at "24/07/2015 - 08:59":

Thanks for sharing the link Phil, superb article from City PM - text below .....

Buy-to-let landlords have a huge advantage in the market as they can offset their mortgage interest payments against their income, whereas homebuyers cannot.” That’s how the chancellor explained his decision in the Budget to require that landlords, unlike other businesses, effectively pay tax on their borrowings – their buy-to-let mortgage. But the chancellor has made a significant blunder: his ill-advised move will push up rents and hit the economy.

The problem is that the chancellor’s comparison with homeowners is not correct. The day after the Budget, the Institute for Fiscal Studies’ Paul Johnson correctly said that “rental property is taxed more heavily than owner occupied property.” Even the Tories’ favoured think tank Policy Exchange has concluded that the tax system “massively favours home ownership.”

Unlike homeowners, landlords are taxed on rental income and capital gains. And the VAT system works against building new homes to rent by preferring home owner properties over rented housing.

In the Budget red book, ministers also argued that the policy would save £665m by 2020-21. It is curious how they come to this figure given that, in June, ministers admitted in answer to a parliamentary question that the government had made no assessment of the total tax take from individual residential landlords.

In its impact assessment, HMRC has argued that one in five private sector landlords will be affected by the decision. Such figures completely miss the point, since what matters is not the number of landlords affected, but the number of properties. Properties are mortgaged, not landlords.

Why also, since the policy will not begin to be rolled out until 2017, has no assessment been made of its likely impact when interest rates inevitably rise? As PwC has observed, “if interest rates increase over the coming years, and rental yields don’t keep pace, investors could be paying tax on a loss.”

Why does any of this matter?

For the economy, it would be a disaster. Between 1986 and 2012, 57 per cent of all new dwellings created were private homes to rent, the majority of which were by individual landlords providing vital houses for those requiring accommodation, especially those needing to move for work or study. These homes were not “taken” from those who wished to buy. As financial secretary to the Treasury David Gauke has argued, rented housing provides an important boost to the economy “through improved labour market flexibility”. Rented property offers a flexible accommodation option for those who do not want the geographical tie of ownership.

For tenants, it would be a disaster too, with landlords inevitably looking to hike rents to cover the financial hit they now face. As Liam O’Doherty, director in PwC’s real estate tax team, has concluded, the proposal “could see buy-to-let investors feeling the squeeze and putting up rents.” As a landlord myself, “could” is sadly an understatement.

What of the likely impact on Treasury revenues? Professor Michael Ball of Reading University has previously calculated that each tenancy in the private sector makes a net contribution to the Treasury of around £1,000. With the possibility of many landlords withdrawing from the market altogether, the savings ministers anticipate could end up being on the optimistic side.

In short, the Budget fundamentally missed the point on the provision of private rental housing.

Rather than walking the populist path of bashing landlords, ministers should have avoided comparing apples with pears. Amounting to almost 90 per cent of the country’s landlords, dedicated individuals, providing much-needed homes to live in while seeking an income for themselves, should not be compared to home owners but with other businesses involved in property, such as commercial property landlords.

If the government had done so, it would have fast become clear that, despite the support that individual landlords provide to local economies, they are not given the same encouragement to build provided to commercial landlords. This is an anomaly that needs to end.

By recognising individual landlords as businesses within the tax system, they could better contribute towards the government’s housing ambitions. For example, roll-over capital gains tax relief could be allowed where the sale is to a first-time buyer of a property for rent, with suitable controls to prevent abuse, such as an upper limit on price.

The chancellor had an opportunity. Free from the compromises required by coalition, he could have heralded in a new era for the private rental market, one that supported efforts to professionalise it by putting it on a proper business footing.

What we got instead was a Budget that will do little to boost the supply of new housing and everything to drive up costs for tenants.
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I have spoken to the PA of Alan Ward who wrote the City Link article and sent them both the following email ....

Dear Alan

Congratulations on producing the best article so far to explain the potential impact of the summer budget on the PRS and the wider economy.

Property118 is an online network of nearly 200,000 UK landlords.

If you plan to produce more articles on this subject you may be interested in the research our members are sharing freely. One such example is a spreadsheet produced by a think tank of chartered accountants, who have liaised with Megan Shaw at HMRC, to help landlords to calculate the real impact of the Budget proposals on their personal finances. Using Megan Shaw’s own example the landlords will end up paying more than 150% of net profit in tax, even though they are currently basis rate tax payers – spreadsheet article available to download via a link in this article >>> http://www.property118.com/?p=76750

Our budget overview article has attracted nearly 70,000 followers and well over 1,000 comment – link >>> http://www.property118.com/?p=76164
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