Finance News

What the Budget Needs to do for Housing, Buy-to-Let and First Time Buyers

Rose Jinks - November 20, 2017
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With the Autumn Budget being delivered this Wednesday (22nd November 2017), industry experts are coming out in force to offer their opinions on what needs to be done.

Our writer Rose, on behalf of our partner Just Landlords, has given her thoughts.

Now, Peter Williams, the Executive Director of the Intermediary Mortgage Lenders Association (IMLA), explains what he wants the Chancellor to announce regarding housing, buy-to-let and first time buyers on Wednesday: “Expectations are rising that decisive action on pushing back the decline of homeownership might emerge from [this] week’s Budget, but the private rented sector in general and the buy-to-let market particular must be no-go-zones for the Chancellor when it comes to raising revenues to solve the UK housing crisis.

“The private rental sector is already in danger of wilting under sustained pressure of Government action, and the market is still in a state of flux due to the raft of regulatory changes imposed over the last two years. Far-reaching policies to reduce mortgage interest tax relief and raise Stamp Duty charges – at the same time as tightening underwriting criteria – are still new, and their effects have yet to fully bed in. The buy-to-let slowdown has already started and is forecast to continue, reducing further investment and portfolio expansion.”

He continues: “The Chancellor is under increasing pressure to outline a solution to the housing crisis at Wednesday’s Autumn Budget. According to IMLA’s research, the majority of lenders agree this should take the form of increased efforts to boost overall housebuilding (79%) and more provide starter homes (58%). Further punitive tax and regulation on buy-to-let is not the answer, which could cause the supply of high quality rental accommodation to dwindle even further.

“Any action on further boosting housebuilding should be welcomed, but new homes won’t materialise overnight and the supply of affordable homes remains critically low. People still need somewhere to live while we fix the supply shortage: 4.3m people are currently renting in the UK, and rely on a well-served and well-supported private rented sector while trying to save for a home of their own. Further punitive taxation measures for landlords will reduce supply and put pressure on to raise rents, both causing more problems for the households who currently rent but hope to buy. Landlords are not the problem, rather it is the lack of homes and not least affordable homes. That’s where the Budget should focus.”

Williams adds: “We hope to see an Autumn Budget that is supportive of both ends of the property market, as one without the other will only worsen the UK housing crisis.”

Last week, a range of industry experts offered their opinions: https://www.justlandlords.co.uk/news/agent-begs-chancellor-homes-stamp-duty/

We also have further predictions from Will Handley, the CEO of HomeRenter, on his predictions. He offers his wish list: “We want to see a fairer, more equitable marketplace for the UK’s private rental sector. Encouragingly, in recent times, the Government has introduced a raft of measures that penalise private landlords with a view to create more of a renters’ market. However, there’s a real and present danger that these prove to be boomerang policies which actually result in more costs being passed on to the unwitting tenant. Whilst we sincerely hope several of these policies might be revised or heavily tweaked next Wednesday, we’re not holding our breath. So, what can we expect? 

“On the basis that the Government won’t back-pedal on restricting finance cost relief for individual landlords, we predict the Chancellor will focus on initiatives to enforce the tapering of interest relief. For example, we expect the Government to firm up on plans to professionalise and certify the UK’s million-plus accidental landlords, to ensure the additional tax take from restricting interest relief isn’t circumvented.
“We also expect the Government to intervene on tenancy length policies. Whilst both main political parties have made a fair bit of noise about instituting longer-term tenancies, the truth of the matter is both tenants and landlords enjoy the flexibility of break clauses. Landlords and tenants would resist a one-size-fits-all move to two or three year fixed tenancies. With that in mind, we’re predicting some form of tax incentive to be announced for landlords who provide longer-term tenancies to those seeking one, such as families.”
Handley goes into more detail about his hopes for landlords and tenants: “Our wish list for landlords: A repeal, or significant modification, of the tapering of the ability to mortgage interest from taxable profits (Section 24). Professional and private landlords believe this legislation will counterintuitively see more costs passed on to tenants and the lowering of standards in the private rented sector, as more buy-to-let landlords sell up and exit the market; A reversal on the 2015 3% uplift on Stamp Duty for buy-to-let landlords. We believe there are more effective ways to stimulate the sales market for first time buyers, such as building more homes, which don’t risk impacting the provision of quality private rental accommodation; The introduction of a national redress scheme to compel landlords to register with an ombudsman or governing body. We can see the benefits of this outweighing the negatives as it helps professionalise and police the sector as it increasingly moves online and cuts out the traditional estate agent.

 
“Our wish list for tenants: Both parties have made noise about instituting policies that require longer-term tenancies. However, from our research, we find that the majority of tenants are just as likely as their landlords to prefer the flexibility afforded by six-month break clauses. So, whilst long-term tenancies can be of real financial benefit and security to both parties, we don’t see a one-size-fits-all approach working. Rather, we’d like to see some form of tax incentive for landlords who provide longer-term tenancies to those seeking long-term tenancies, such as families; We’d like to see more fine print on the implementation of the lettings fee ban. For example, we support the move to no deposit renting. However, we’re keen to understand the fate of several new online players offering insurance-backed schemes that are solely tenant-funded and whether these will be seen as tenant admin fees too; Regular rent payments should be recorded on renters’ credit scores and count to their creditworthiness when eventually getting on the ladder. The Government needs to take these measures to reflect the fact that more people are renting homes and for longer – often into their 30s and 50s and with families. As it stands, rental expenditure is by far generation rent’s biggest monthly outlay. However, because rent is paid in advance, it’s not traditionally counted into an individual’s wider credit rating and this needs to change.”