0:05 AM, 14th November 2024, About A week ago 40
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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.”
TheMaluka
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Sign Up9:42 AM, 15th November 2024, About 6 days ago
Reply to the comment left by Mick Roberts at 15/11/2024 - 08:35
", , , , dimwit lack of common sense Eton Toff imbecile"
Careful Mick, you could be in trouble with a remark like this - they may have gone to Harrow.
Mick Roberts
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Sign Up9:45 AM, 15th November 2024, About 6 days ago
Reply to the comment left by TheMaluka at 15/11/2024 - 09:42
Ha ha I gather Harrow is even posher then or rougher.
GlanACC
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Sign Up9:02 AM, 16th November 2024, About 5 days ago
The trouble with S24 is that before that 'landlords had never had it so good' . It was easy to get 85% loans and when S24 was introduced it meant a LOT of landlords were over extended.
Anyone buying a property after S24 really should have put down at least 50% deposit, this in itself would have shrunk the market
Cider Drinker
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Sign Up10:16 AM, 16th November 2024, About 5 days ago
Section 24 is one of the reasons. There are many.
I’m not impacted by S24 but my rents need to rise because of inflation. It has been 24% over the past 5 years. I increased the rent by 15% earlier this year and will raise them by 5% next year and the year after. Or 10% next year if the talk of rent caps doesn’t cease.
NewYorkie
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Sign Up10:16 AM, 16th November 2024, About 5 days ago
Reply to the comment left by GlanACC at 16/11/2024 - 09:02
True. If you look at when the PRS started to contract, it corrolates with when S24 started to bite.
'Leverage' was the model touted by the 'experts', and facilitated by the lenders, whereby newbies could enter the PRS with next to nothing, and quickly build a portfolio. Unfortunately, built on the shifting sands of interest rates!
I known of a chap who bought 12 off-plan flats in the same block... in 2007. When the crash hit, he went bankrupt and they were sold at rock-bottom prices. The impact of that was the block values never recovered, even though they are excellent and the block is very well-managed under RTM.
GlanACC
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Sign Up10:44 AM, 16th November 2024, About 5 days ago
Reply to the comment left by NewYorkie at 16/11/2024 - 10:16
I agree, at one point I had £1.8m in mortgages. When the crash came I was losing money, HOWEVER as I had another profitable income stream (computer work) I subsidised the properties from that business.
In 2007 I was one of the landlords on the BBC Money Program about the landlords losing money.
Many of those landlords went bust, I am still here.
NewYorkie
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Sign Up13:36 PM, 16th November 2024, About 5 days ago
Reply to the comment left by GlanACC at 16/11/2024 - 10:44
BTL was never my main income. 'IT' paid me well, but when I was let go at the end of 2008, my rental income served me well for a few months. No more afternoons on expenses at the Liverpool St Champagne & Oyster Bar for a while!
But if S24 had been around when I had a high salary, plus high rental income, plus high mortgages, I would have been scuppered.
philip allen
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Sign Up2:32 AM, 17th November 2024, About 4 days ago
This is brilliant, Mick.
Mick Roberts
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Sign Up5:41 AM, 17th November 2024, About 4 days ago
Reply to the comment left by GlanACC at 16/11/2024 - 09:02
Agreed Glan. But still a very cruel retrospective measure that's made hundreds of thousands homeless.
Govt just think Oh Landlord can sell & tenant can get somewhere else. That may have been partly true 2015 as we all know, not now.
Fizi247
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Sign Up2:31 AM, 18th November 2024, About 3 days ago
Section 24 is only part of the problem. A significant hidden issue lies with unregulated mortgage lenders. When applying for buy-to-let (BTL) mortgages around 2019, these lenders considered borrowers' salaries. However, between 2019 and 2024, they shifted their criteria from salary-based assessments to rental income evaluations.
This change has contributed to rising rents. Not only has it increased rental prices, but when landlords moved out of their five-year fixed-rate mortgages, many found that specialist lenders, such as Landbay, refused to offer product transfers to more favourable rates. As a result, landlords became trapped on standard variable rates (SVR), leading to the difficult choice of serving Section 21 notices to good tenants, facing mortgage arrears, and dealing with repossessions and deteriorating credit scores.
While the government continues to impose challenges on landlords within the housing ecosystem, it overlooks the fact that lenders like Landbay are generating exorbitant profits—up to 5,500%. Local authorities, for instance, have set budgets based on rental prices, such as £1,300 for a two-bedroom flat in Bromley. However, if a lender alters the mortgage application criteria, landlords may now need to demonstrate a rental income of £1,800 per month to qualify for the same mortgage. This situation drives landlords into arrears, creates uncertainty for tenants, and places local authorities under financial strain as they attempt to meet the demands imposed by these unregulated BTL lenders.
It raises a critical question: how can one organisation within this ecosystem achieve a profit margin of 5,500% while the average landlord faces a deficit of over £6,000 due to SVRs? This disparity is a key factor behind the fact that 29% of all property sales are from private rental sector landlords.