Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "Connie Cheuk" at "07/09/2015 - 22:49":

Apologies - something* from RLA, Ros.

Reply to the comment left by "Ros ." at "07/09/2015 - 19:46":

Ros you are right to point out that private landlord rental profits are taxed and those of housing associations are not. What is also true is that new build council and housing association housing is heavily subsidised by Government grant. Councils can also prudentially borrow at very low rates of interest. This is why council and housing association rents are lower than rents in private rented housing.

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "07/09/2015 - 23:02":

Thanks BTL. In that case I think I will need to write to the authors of the Report because the table is very misleading - making it look like landlords get some great, disproportionate profit compared to social landlords.
It could easily be that when everything is taken into account the private rentals are often cheaper for the Government. I could see that with houses I rent out for £300 to £350 per month. As these are often in dodgier, high maintenance areas, a lot is lost through bad tenant behaviour, voids etc. and then we sometimes get demands from the council to do non-essential expensive works, pretty soon they'll probably be licensed, there are the usual gas safety certs, insurance etc. I think if all Housing Association costs were taken into account, they are probably more expensive for the tax payer in these kinds of areas... Food for thought.

Reply to the comment left by "Mark Alexander" at "07/09/2015 - 20:45":

Hi Mark, your comment prompted me to look for the BoE piece you refer which I presume to be the most recent financial stability report (printed on June 30th). In the report, the BoE's concerns actually appear to be twofold regarding the risk posed to financial stability from btl lending. To quote the report:

"Buy-to-let lending could pose a risk to financial stability.
The actions of buy-to-let investors affect the broader housing and mortgage markets as individuals compete to buy the same pool of properties. Looser lending standards in the buy-to-let sector could contribute to general house price increases and a broader increase in household indebtedness. And in a downswing, investors selling buy-to-let properties into an illiquid market could amplify falls in house prices, potentially raising losses given default for all mortgages. This could be a particular concern in a rising interest rate environment, if properties become unprofitable given higher debt-servicing costs. Buy-to-let borrowers are potentially more vulnerable to rising interest rates because loans are more likely to be interest only and extended on floating-rate terms, and affordability tends to be tested at lower stressed interest rates than owner-occupied lending.
HM Treasury will consult on tools for the FPC related to buy-to-let lending later in 2015, with a view to building an in-depth evidence base on how the operation of the UK buy-to-let housing market may carry risks to financial stability. The FPC will continue to monitor this sector closely."

The treasury appears, as you say, to be pinning the proposals on the BOE report. However I think it would be unsound to cherry pick one of the bank's concerns (landlords selling and amplifying price falls) without examining whether the tax policy could slow the increase household indebtedness.

Having now read the report, I'm beginning to think that maybe this tax proposal is actually designed to take the more leveraged btl out of the market in a controlled manner before rates rise (and all whilst raising revenue and picking up ftb votes under the "level playing field" narrative). has anyone requested boe data regarding the financial stability point, as you're going to need to construct an argument against treasury claiming "it will increase financial stability, the boe said so"

Reply to the comment left by "Barry White" at "08/09/2015 - 00:14":

The Question i had in early July was " on what basis is the soletrader LL different to the corporate LL when running identical models?" It doesnt appear that the BoE has identified any differences in your post Barry, so on what basis do the treasury base upending the fundamenatal: Profit =Income -Expenses as applicable to all business models ?, there are a lot of consequences that have not been considered and show the tax grab as extremely ill thought out.

The last little "crash" we had, saw defaults on mortgage payments and the enevitable repos - as you are good at finding and analysing good data , perhaps you could report back with the figures on OO defaults/repos - v - BTL LL default s/repos. i seem to remember the OO takingthe brunt of the pain in the little correction of 08 is, please correct me if i am wrong , i see no reason why this will be any different on the next one ....it will be different tho ...more corp LL will snap up prop quicker from OO i think. So this tax grab is not going to do what it says on the tin is it ?

A good many LL will actually be far better off if they restructure , this has already forced a lot of LL to take a hard look at their hands off business and explore options. There are some cash rich who will buy more to generate higher profits to offset the tax burden.

I have spoken to some portfolio holders who have willing investors lining up to fuel up newly ltd companies to buy up extremely profitable individual props and whole portfolios.

There is the option of incorporating without CGT & SD

There will be individual casualities if this goes through - i think there is more than a fighting chance that it actually wont, purely on the basis that it will completely unsettle all unincorporated businesses, leaving them on very shaky ground.

As far as HPC fire sale prices on property, that was an unvenerable report written by Enid Blyton, with Brothers Grimm collaborating after a 3 day session on bland home brew smoking batsh*t (bad mix, makes you crazy and deluded in no uncertain terms) Rental demand is high and growing, once again BTL will support and carry the Housing market and short of shooting LL the PRS will continue to grow in my opinion.

Reply to the comment left by "Barry White" at "07/09/2015 - 18:56":

"My point about rent a room relief is that it’s incorrect to say it’s an owner occupier benefit; legally it applies to tenants too. Nothing more, nothing less. It is however conceivable that treasury make the same point in response which will weaken the point as you backtrack on that particular point. Better to be precise from the outset."

I guess we need to level the playing field here as well then ..if tenants are to be granted the ability to override AST & mortgage conditions to sublet and claim rent a room relief, clearly lodgers will need to be afforded the same rights ? ..so lets see OO, tenants & lodgers can claim it but LL get taxed out of business on turnover ? All getting rather ridiculous isn't it!!

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "07/09/2015 - 23:02":

This is true, is this reflected on the first article in the table on last page? I bet its not and if the cost of all these subsidises are included would social housing be cheaper ?

Reply to the comment left by "Mark Alexander" at "07/09/2015 - 21:22":

Its also the dire wages that they now pay people , they cannot afford to buy.
A min wage of £9 by 2020 , its peanuts , can someone show the wage growth from 1995 til now?

Reply to the comment left by "Barry White" at "08/09/2015 - 00:14":

Barry

Your comments don't really address the points I have raised. I would be grateful if you would consider them further and if you have any evidence from the BoE that they are supportive of the tax proposals then please present it.

My understanding is that BoE have alternative strategies to calm the BTL market and if my understanding of their proposals is correct then I broadly support them. BoE have not suggested or supported this tax policy so far as I can tell. Their suggestion was to control the availability of BTL finance going forwards. I have not seen any specific proposals from them but they have alluded to tightening of stress testing criteria through regulation. This is very sensible because it deals with future issues without affecting business decisions made historically.

BoE assertions that increased costs to landlords could have an adverse affect on the economy appears to me that the Chancellors proposals are quite the opposite to what they have suggested and could become the catalyst of their concerns actually being played out.
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Reply to my original letter suggesting comparison with his expenses from John Penrose MP. I shall be taking up his invitation to a meeting at a surgery:

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Thank you for responding to my letter about mortgage interest rate relief. I fear your analogy with MP expenses isn't precise (for example, my staff expenses are paid via Parliament and go nowhere near me or my tax affairs) although, nonetheless, your underlying substantive point is still very well-made and important. On the substance, it still seems the old system is perverse when it rewards high-earning landlords at 40% but low-earning ones at half that. As a comparison, company taxes seem fairer because they are lower for small firms and higher for the large ones. So I suppose I appreciate your point about the change being unwelcome, but I'm still not sure why taxpayers should be rewarding rich landlords at a higher rate than poorer ones. That said, I'm happy to discuss this with you further at a surgery meeting if you feel that would help?