Section 24 is the reason for rocketing rents – not landlords

Reply to the comment left by NewYorkie at 14/11/2024 - 13:09
Bear in mind the receipts from the sale of council houses went to central government, not the respective local authority. On that basis they had no funds to build new stock.

Reply to the comment left by Retired banker at 14/11/2024 - 14:31
Agreed. But it didn't change the effect on the overall housing stock across the social and private sectors.

Our problem is we simply have too many people requiring social housing, exacerbated by uncontrolled immigration, most of which is prioritised for the available social housing.

Reply to the comment left by Struggling1 at 14/11/2024 - 14:26
I am in a similar position with my remaining BTL, but had a lucky escape from the worst effects of s24 back in 2016.

I planned to move out of London and had remortgaged my home for £700K with the intention of letting it for a minimum of £30k pa. That, on top of additional rental income of £40k, plus being a higher rate taxpayer, brought home to me the potentially disastrous effects of s24.

I kept my London home empty (more loss for the renters) and invested the mortgage money in Investment Bonds, etc... which produced more than the rental income would have done, and zero s24 tax to HMRC. I then sold my London flat and flat up North (yet more loss to renters), and now have just the one 'problem' flat to dispose of when the time's right.

Reply to the comment left by Des Taylor & Phil Turtle, Landlord Licensing & Defence at 14/11/2024 - 10:13
To award tenants 2 years' free accommodation for some misdemeanour, even though they have had the benefit of occupation during that time, and the landlord has been paying all the expenses, is ridiculously punitive and out of all proportion. A much more equitable solution would be to determine a reasonable reduction for the impairment, like happens for damaged goods.
There is only one way this draconian punishment will go, which is that the landlord will have to sell up to cover the cost and make said tenants and future ones homeless.
This is no doubt what the real agenda was all along, to redistribute wealth from those that have had the temerity to make the sacrifices necessarily to achieve some small amount of wealth, to those that did not, for whatever reason.

Reply to the comment left by Jo Westlake at 14/11/2024 - 10:26
As a higher rate taxpayer, section 24 effectively inflates the mortgage cost, by 33%, which then has to be covered by lower profits, higher rents or selling up to avoid making a loss, reducing supply vs demand.
An additional rate taxpayer effectively pays a 45% premium, and if you are in the 60% tax trap, it's a 100% surcharge.
So a typical 4.5% mortgage would become effectively 6%, 6.5% or 9%, depending on your tax bracket.
The problem for tenants, who lets face it pay the landlord to pay the mortgage on their behalf so they can live in the home they are renting instead of taking out their own mortgage, is that their money is effectively being taxed twice before the mortgage is paid, first when they earn it and second when they pay the rent. This is nothing short of totally immoral and discriminatory behaviour towards tenants.
But it's much worse than that, because in a competitive market, the rent would be set by the person who has the lowest costs and so can charge the least and win the business. Those landlords burdened by section 24 would simply not be able to compete, and would have to bow out or run at a loss in the hope that things would get better over time.
But what is actually happening is that because supply is so lacking compared to demand, the rent is effectively being set by those with the highest cost, and those without mortgages or who only pay basic rate can benefit from the new market rate even though their costs are not being impacted in the same way.
So a relatively small number of landlords being negatively impacted by section 24 is causing most tenants to have to pay more, and many savvy unencumbered landlords will be getting an unexpected windfall as a result. Which is one of the perverse outcomes of this very sick and twisted attack on landlords and tenants, which effectively amounts to a tax on ALL tenants.

Reply to the comment left by Downsize Government at 14/11/2024 - 10:06
You say it exactly how it is

Reply to the comment left by Des Taylor & Phil Turtle, Landlord Licensing & Defence at 14/11/2024 - 10:13
The brickie is my mate Lee's words ha ha.
U r joking, doubling RRO's? Do they not realise even less houses for lower earners.....

Reply to the comment left by Jo Westlake at 14/11/2024 - 10:26
Yes,
I've got some more figures below.
George Osborne said in 2015 it will only affect 1 in 5 Landlords. That is over 2 million tenants paying higher rents.
Some notes below on Section 24, I've simplified it at top & in detail further down.

A simple I hope easy way to understand this is
If you paid £800pm rent
Tax bill would be £320pm
Leaves you £480pm
Mortgage £500pm
Means you've lost £20 EVERY month. Lost £240 every year EVERY house.
And that's how Section 24 Tax works. Because the Govt don't like Landlords and says we shouldn't be allowed to deduct mortgage from earnings before paying Tax.
Pre 2015, they allowed the mortgage/loan just like every other business. They bought this Anti Landlord measure in and it got them votes, got them more tax, but it started the real shortage and expensive rents u see for tenants now.

What used to happen is
Rent £800pm
Mortgage £500pm
Leaves you £300pm.
Tax bill £120pm.
Means you make £180pm which then means you've got enough for maintenance, repairs, refurbishment etc.
That's how the Govt allows every other business to work.

A Simple Comparison
To put it in simpler terms, imagine a bricklayer who could no longer deduct the cost of bricks as an expense. If they earn £500 for a job but spend £500 on bricks, they would still need to pay tax on the £500 income, even though they make no profit.
This policy impacts landlords across the UK and can lead to higher operating costs, which may influence the rental market overall. If you have any questions or would like further details, please feel free to reach out.

Another example
£700 rent x 40% Tax = £280 leaves £420 minus £500 mortgage = Loss £80
£800 rent x 40% Tax = £320 leaves £480 minus £500 mortgage = Loss £20
£900 rent x 40% tax = £360 leaves £540 minus £500 mortgage = profit £40.
So the Tax system the Govt bought in for Landlords forces Landlords to lose unless charge high rents.
Hence why rents are now so expensive.
Write to your MP mentioning Section 24. If he she says the private person doesn't get tax relief on their mortgage interest, say the private person doesn't pay tax on any rent to start with to be entitled to any tax relief you dimwit lack of common sense Eton Toff imbecile.

Reply to the comment left by Mick Roberts at 15/11/2024 - 08:35
"George Osborne said in 2015 it will only affect 1 in 5 Landlords. That is over 2 million tenants paying higher rents."
Actually Mick, it's a lot worse than that. The PRS graph is like a hockey stick. The long handle bit is the 2 million+ landlords who only own one or 2 houses. The high point at the other end are the lower number of large incorporated landlords. The big chunk, where the graph starts rising, and where the bulk of the properties lie, is the small to medium sized portfolio landlords who bought in their own names, and are the 1 in 5 that Osborne referred to. Numbers vary, but it's approx 50%, or even more, of the actual size of the PRS. So 5 million+ tenants directly affected by S24

Reply to the comment left by Grumpy Doug at 15/11/2024 - 09:17
Ha ha yes I was gonna' say that but din't want to confuse people even more.
Yes those 1 in 5 Landlords actually own a more percentage each.