The National Residential Landlords Association (NRLA) warns that the Chancellor needs to end the tax on new homes in the Budget or risk a supply crisis in the rental housing market.
The NRLA is calling on the Chancellor to scrap the 3% Stamp Duty levy on the purchase of homes to rent where landlords invest in properties that add to the net supply of housing. They state that this should include:
- Developing new housing
- Converting large properties into affordable units
- Changing the use of a property from commercial to residential
- Bringing one of the almost 650,000 empty homes in England back into use
This comes as the Royal Institution of Chartered Surveyors has concluded that rents will rise because of demand for properties increasing, whilst new instructions from landlords continue to “dwindle.”
The NRLA highlights that Rightmove revealed asking rents for outside of London increased in Q4 of 2020 for the first time since 2011. This led to a record average of £972 a month. Tim Bannister, Rightmove’s Director of Property Data, commented within their January Rental Trends Tracker report that outside of city centres the available stock is lower than usual for this time of year and demand is higher.
Ben Beadle, Chief Executive of the National Residential Landlords Association said: “To have a tax on developing new housing is completely nonsensical at a time when more is needed. Supporting growth in the private rental market, alongside all other housing types, would provide a significant boost to the economy in the midst of the COVID-19 pandemic. Research published last year suggests that landlords inject over £3.5 billion into local businesses across the UK.”
The NRLA also wants changes to the tax system to encourage the provision of longer-term rental property over short-term holiday lets.
The NRLA says that from April this year the final phase of reducing mortgage interest relief for landlords to the basic rate of income tax will be completed, but this does not apply to furnished holiday lets. They believe this has encouraged the removal of properties from the long-term market for use as short-term holiday lets.
Ben Beadle, comments: “To be taxing long term homes to rent less favourably than holiday lets is simply bizarre. It completely undermines efforts by the Government to encourage the provision of long term, secure housing.
“It is time for the Government to realise that its tax policies have created a shortage of rented housing. This can only mean higher rents and reduced choice for renters. This is not going to do much for the levelling up agenda.”