0:05 AM, 14th November 2024, About 2 hours ago
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Tenant group Acorn claims that rent caps are the solution to curb rising rents.
The group also believes “landlords have no guidance on what rent should be”, despite many landlords using the market rate in an area as guidance for setting rent.
Mick Roberts, one of Nottingham’s largest landlords housing benefit tenants, slammed Acorn’s call for rent caps, saying Section 24 is the real cause of high rents.
Keziah Hall, chair of the Acorn Brighton Union, told BBC Radio Sussex that several factors including second homes, a high student population, and an influx of commuters are all pushing rents up in Brighton.
However, Ms Hall argues that introducing rent caps could help curb these increases.
“The reality is, there’s no cap on rent,” Ms Hall said. “Landlords have no guidance on what rent should be. Ideally, rent would be tied to the living wage, but there’s nothing like that in place.”
The presenter of the radio programme hit back at Ms Hall, saying a rent cap could make it hard for landlords with mortgages to keep renting out their properties.
Ms Hall replied: “There needs to be something put in place for renters. Many people in Brighton and Hove are being pushed out because the rent is so expensive, and they can’t afford it.”
Despite Acorn’s call for rent controls, evidence from Scotland suggests they have had a negative impact, with rents rocketing by 14.3% in just one year.
Mr Roberts says rent caps will make it impossible for tenants to secure a home and scrapping Section 24 is the answer to stop rent increases.
Section 24 was introduced in the Finance Act 2015 by the then Chancellor George Osbourne which removed a landlord’s ability to offset their mortgage interest, from rental income before they calculated the tax liability and allow a 20% basic rate deduction.
Mr Roberts tells Property118: “Instead of pushing for rent caps that could make it impossible for landlords to stay in business, maybe it’s time to ask, “Why is rent so expensive?”
“One of the main reasons is Section 24 Tax, which is hurting tenants.”
He added: “Here’s an example, if a landlord is charging £800 a month in rent, their tax bill could be £320 a month. That leaves them with £480, which is less than the £500 mortgage payment, meaning they’re losing £20 every single month — £240 a year, per property.
“The government doesn’t want landlords to deduct mortgage interest before paying tax, unlike every other business.
“Before 2015, landlords could deduct mortgage interest like any other business, which made sense. However, the government brought in this anti-landlord measure to get votes and collect more tax, and now we’re seeing the consequences: a housing shortage and higher rents for tenants.”
Mr Roberts adds that it is completely unfair that landlords are not treated the same as other businesses when it comes to tax deductions.
He said: “Under the old system, a landlord charging £800 rent and paying a £500 mortgage would have £300 left over. After a £120 tax bill, they’d make £180 profit, which is enough to cover maintenance and repairs. That’s how every other business works.
“To put it in simpler terms, imagine a bricklayer who can’t deduct the cost of bricks as an expense. If they earn £500 for a job but spend £500 on bricks, they still have to pay tax on the full £500, even though they’ve made no profit.
“That’s how Section 24 is hurting landlords, and it’s one of the reasons rents are going up.”
