Well done Rachel Reeves, you’ve just obliterated the rental market

Stamp duty rise will bring in more problems than it does tax income

As a full-time landlord I’ve been worrying about Labour’s first Budget. Rumours about everything from paying National Insurance contributions on my “unearned income” to equalising capital gains tax to income tax levels had me in quite a frenzy.
Thankfully, capital gains tax on residential property has remained unchanged – sigh of relief, given I have sales going through at the moment.
But then, the sting: stamp duty land tax on additional dwellings has increased from 3pc to 5pc. That means the stamp duty bill for a landlord or second homeowner buying a £250,000 property will increase by £5,000, from £7,500 to £12,500 – a 67pc increase.
This is a clear indication that Labour does not want landlords, or anybody else, to own more than one home.
Is it a problem? As is usual for this kind of tax policy, not for the very rich. But for the rest of us in the not-super-wealthy category, which will be most of us, the ramifications are different.
While I appreciate Labour’s desire to make everybody a homeowner – albeit of just one property – the fact is not everybody wants to, nor can afford to, become a homeowner. And that is where the rental market is of prime importance.
Some people need, or want, to be mobile. They need to be able to take up job opportunities in other areas, or move closer to families should circumstances change – and maybe they don’t want to buy a house with all the associated fees, costs and financial commitment involved. Maybe they want to rent and maybe they want to rent from a private landlord rather than live in a council house or social accommodation.
Choice is not a bad thing.
But future investment in the rental market from newer younger landlords is now looking unlikely given the increase in the already huge upfront costs.
As I write this, I’m waiting for the call to tell me my sale has collapsed. I am selling a property to an investor who had set up their rental business in the correct way. They have a company – which can still claim the full mortgage interest relief – and they have a hunger to fill the growing need for rental accommodation in our country.
If my sale collapses it will mean my property is likely only to appeal to the owner-occupier market – who won’t have to pay any tax at all if I sell to a first-time buyer. But when you think about that single sale across the rest of the market, you can start to see the implications for what will happen next.
Recommended
The other major problem is that not all properties are of interest to owner-occupiers.
All of the properties I’ve bought over the years needed substantial work to make them fit to live in. Some of them were in such a dire state you couldn’t even get a mortgage on them. What then will happen to these? People need a home, not a DIY project.
Investors are the lifeblood for bringing distressed properties back into use. This has already been hard enough with the massive increase in the costs of material and labour, but now taking on these projects will become even more risky and less lucrative.
More than ever, I feel it is the tenants who will suffer.
Labour have made it clear they have a one-home-only policy. But for those who can’t afford to or don’t want to buy, the choice for renting will become ever more restricted and even more expensive.