Mortgage interest tax relief for landlords should be phased out to make the housing market fairer, a Conservative think-tank has said

What’s the latest?

Tax breaks for buy-to-let landlords should be abolished to enable more people to get on to the property ladder, a Conservative think-tank has said.

Onward called for an end to mortgage interest tax relief for buy-to-let investors in a bid to make the housing market fairer.

It claimed the growth in investment landlords had locked 2.2 million people out of homeownership.

The call was part of a package of proposals to help tackle the UK’s housing crisis, which included giving councils more powers to stop overseas buyers from purchasing new property in areas of high demand.

Why is this happening?

Onward said tax policies should be reformed to limit demand for housing as a speculative asset, as investors had pushed up both house prices and rents.

It pointed out that private renters spent an average of just 10% of their income on accommodation across most of the country and 15% in London in the 1960s and early 1980s, compared with 30% and 40% respectively today.

It suggested the high cost of renting had contributed to 48% of men aged between 22 and 26 still living with their parents.

Above: This two-bedroom end-of-terrace house in Attleborough is within easy reach of Norwich. It's ideal for first-time buyers and is up for sale at £167,500.

Who does it affect?

Ending tax breaks for landlords may help more people get on to the property ladder, as it would reduce the appeal of investing in a buy-to-let property, meaning first-time buyers face less competition for homes at the bottom of the housing ladder.

But it could be bad news for those who want to continue renting.

Landlords have been hit by a raft of tax changes in recent years, including an end to the ‘wear and tear’ allowance, limits on mortgage interest tax relief and a 3% stamp duty surcharge.

As a result, many have stopped expanding their portfolios, with some selling up altogether.

The situation is creating a mismatch between the supply of homes in the private rented sector and demand for them, putting upward pressure of rents.

What’s the background?

The UK’s housing problems stem from the fact it is not building enough new properties to keep pace with the rising population.

Onward said France had built nearly twice as many new homes each year as the UK since 1970 – the equivalent of 7.8 million more homes.

As a result, real house price growth in France had been just half the rate of that in the UK.

To help address the issue, it called for councils to be granted new powers and borrowing capacities so that they could buy land and develop it themselves.

The group also wants measures to stop housebuilders focusing on land assembly, and instead boost competition in the sector.

In addition, it suggested a new programme should be launched to help one million younger households over the coming decade, either by assisting them with deposits for new build homes or by providing discounted rental properties.

Top 3 takeaways

  • Calls for mortgage interest tax relief for buy-to-let investors to be abolished

  • Claims the growth in investment landlords had locked 2.2 million people out of homeownership

  • Calls for councils to be given more powers to stop overseas buyers from purchasing new property in areas of high demand.

You might also be interested in...

* DISQUS *
comments powered by Disqus