The new government has been criticised for its anti-landlord rhetoric and bias with new legislation and likely tax hikes in this month’s Budget that will cost renters dear.
Purplebricks chief executive, Sam Mitchell, criticised Labour’s anticipated capital gains tax (CGT) raid which could force landlords to pay thousands of pounds more on the sale of their properties, and believes that tenants and first-time buyers will in turn end up paying more for property.
Mitchell told The Telegraph that landlords will flee the private rented sector if chancellor Rachel Reeves presses ahead with anticipated tax hikes in the Budget later this month.
The Purplebricks boss said: “If you put capital gains tax up, you will have this rush of landlords selling up which is bad for tenants, puts rents up and makes it very difficult to become a first-time buyer.”
He added: “It’s almost impossible to save for a deposit if you’re a tenant that’s shelling out well over £1,000 a month on rent.”
According to Mitchell, the online estate agency has already seen a wave of landlords exiting the market ahead of the Budget on 30 October.
Reeves is said to be considering bringing CGT rate in line with income tax rates.
Currently, the maximum tax rate on profit from the sale of second homes is just 24%, compared to 45% for wages.
Mitchell pointed to the fact that “punitive” measures such as the removal of tax relief for mortgage interest and the introduction of a 3% stamp duty surcharge had already contributed to landlords selling up and rents spiralling.
“It seems to be very popular to bash landlords. The trouble is these policies bashing landlords end up hurting tenants because it just further reduces the supply of stock in the sector,” he said.
HMRC calculations show a 10% increase in the higher CGT rate could backfire and lose the Treasury £2bn in 2027-28.
Meanwhile, a single percentage point increase in the higher rate might pull in only £110m per year.
Mitchell said he was doubtful the policy would either increase supply for first-time buyers or raise funds for the Treasury.
“It won’t do either, I don’t think,” he said, adding this would “defeat the purpose” of raising the levy.
He added the government could consider introducing some form of tax relief for landlords that would also help first-time buyers.
“If they do put capital gains tax for buy-to-let investors, then why not look at more entrepreneurial schemes – for example, reducing that tax burden if you sell a property to your own tenant or a first-time buyer?
“That could be a virtuous circle of helping first-time buyers and not being too punitive to landlords as well.”
Tenants competing for fewer properties as landlords flee the rental market
Well said Sam:
The trouble is these policies bashing landlords end up hurting tenants because it just further reduces the supply of stock in the sector,”
I’m biggest provider in Nottingham to Benefit tenants over 27 years & I ain’t housing em any more.
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Surely you should give them some compensation then Mick? 🙂
Why don’t Generation rent and Shelter crowd fund to help those being evicted – the idea of compensation could be seen as fair if the target wasn’t automatically the landlord. Just stay for free, the landlord can suck it up.
How to attract a new generation of landlords as many of the current reach retirement age and step away …. not.
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Ooh yes, if I say No to anything in the bill, then we need to fined £1000 each time don’t we. That will help bring rents down & increase supply surely.
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The UK’s private rented residential sector has lost approximately 400,000 rental homes since 2016. The majority of Landlords leaving today is due to over priced taxation and not being able to get back their investment. It’s a no brainier. Landlords are fleeing and reinvesting elsewhere.
Successive governments have sold over 2M of their own social homes by way of right to buy. Tenants have become owners and almost half, have resold and pocketed the cash. This policy has netted successive governments over £50bn. Were even 10% of this figure utilised in the provision of building new homes for the homeless and poor it would result in a reducing dramatically the financial burden on local authorities. Ironically over £15Bn is now spent on housing benefit annually, much of which would have been saved had the government housing stock not have been sold off in the first place.
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No. This is based on the premise that landlords set rents based on their costs, which they don’t. Rents are set to whatever the max can be pulled from tenants.
The notion that rental properties being sold to owner-occupiers raises rents is also silly. Every new owner occupied is one less renter. Supply and Demand rise and fall in lock-step. All that happens is the removal of a parasitic rent-seeking intermediate.
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Landlords set their rents at market value not the max they can get.
Every new owner occupier is not necessarily one less renter. Most renters rent rather than buy due to affordability.
Not all homes that are sold by landlords leave the rental market. A fair percent of these homes are bought by new landlords. Supply and demand are interlinked – meaning due to the introduction of regulation & taxation the rental sector will grow smaller leaving 37.5% of the UK population that rent, and have to continue to rent, with less rental homes available which in turn forces, by supply and demand, continued increases in rents.
There are several government options that are sensible: incentives the building of new houses to meet the 750,000 new homes required annually by migration; stop the absurd right to buy scheme where homes are bought cheaply by renters from Councils and then 40% of these bought Council homes sold off again for a profit to Landlords to re-rent. And lastly Landlords could be subsidized to rent to low income renters that would substantially reduce the £15Billion annual cost to Councils who obligation it is to provide homes to those in need. We must remember that most tenants fear the new legislation as landlords are increasingly forced, by government policy, to sell their properties. Were the government prepared to carry out objective research and work with all the stakeholders the crisis could have been avoided. However the Labour government’s intention is to rely on large international corporate entities and pension funds to build more homes. The obvious flaw in this is these new build to rent homes are expensive to build (some are already pulling out due to costs) and manage – leading to rents that are far higher than those already in the private rental sector that the government is intentionally forcing out of business.
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Well said, my tenants see all their mates been evicted from Selective Licensing in Nottingham. All to get at a minority percentage bad Landlords. Now all tenants are hurt.
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You say that but that is exactly what happened in Nottingham with Selective Licensing. We thought we ain’t paying that, we’ve done nothing wrong. So we increased rent to pay for it. Then we found out can charge what we like, as Landlords sold. So some Landlords just keep increasing. Me too on new tenancies as I had no loyalty to that new tenant I didn’t know.
We also found we had to now charge as much as we could get. Cause we never knew where the next charge ref anti Landlord rule was coming from.
Whereas before we tried to be fair and could be, cause could still make money from what we knew was coming. Now we just don’t know what is next
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Decent landlords should not mind if there increased the capital gains tax to 50,% providing it’s reduced to 25% if sold to the tenant. To prevent fraud the discount should only be valid if the tenant had been there for 5 years or more. I have 7 rented properties and all have long term tenants as I treat them fairly.
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Your idea has merit but a substantial percent of Tenants are Tenants precisely because they cannot afford to buy a house. The cost of living provides little or no savings for them. In many cases Tenants prefer to rent as they have no idea when mortgage will be hiked and prefer the flexibility to move to other jobs in other locations or rent a larger or smaller home should they so choose.
With a government proposal of 50% CGT, landlords are selling fast and those who cannot, will probably risk waiting for a new more leniant government in 5 years time.
As the Government is now promoting build to rent by pension funds and large international corporate entities it is noticeable that their rents are higher than PRS rents and overall costs even more expensive than buying a home with a mortgage! Some hope for build to rent! A government that continues to squeeze Council budgets, Housing Association budgets, S106 and burdensome costs on Builders and Developers, and of course Landlords, will lead to a continuation and amplification of the housing crisis. The government will probably fall back on blaming the multi-billion pound black hole, the PRS landlords or the previous government ineptitude -there’s always an excuse the media will take up on their behalf.
The government state they will build 375,000 homes in a year is nonsensical as it equates to 1,065 new homes a day or 44 per hour. Some hope!
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Well said & great facts.
Does my head when they say Build to rent will replace Landlords.
I’m biggest Housing Provider in Nottingham to Benefit tenants over 27 years & many of my tenants are paying 30% below market rent. And market rent is still 10-15% below these Build to rent which are mainly apartments at monent.
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