Guest blog: Shelter's Chief Exec on the rise of unaffordable housing

[JessMumsnet]

This week, to highlight the fact that housing is increasingly unaffordable for many, Shelter published research which showed what our weekly shop would cost if food prices had risen to the degree that housing costs have done over the last decade.

In this guest blog, Shelter's Chief Exec Campbell Robb warns that unless something changes, the next generation will find it even tougher to get a stable and affordable home.

What do you think? Are you struggling to get on the property ladder, with rising rents making it increasingly difficult to save for a deposit - or are you worried for your children's prospects? How do you think the situation could be improved? Post your URLs here if you blog on the subject, or tell us what you think here on the thread.

people with mortgages.

so

back to taxing BTL properly

the issue is affordability

that generally means prices are too high

(noone is seriously suggesting a further drop in interest rates are they?)

If we accept all the gov meddling (mainly Lab) that has helped to inflate house prices including housing benefit and tax credits

seems to me that taxing buy to let like income ie top rate tax taken off it pre deductions (maybe allow a very limited deduction of some bills and maintenance but might be 'cleaner' not to) is the best way to go.

gov needs more money coming in what better way to get it than to take it off someones unearned income?

house affordability is screwed so can fix that too?

can in theory make few changes to HB because you are getting half of it back in tax anyway!

oh you would have to make tax owed on rental income from property in the UK payable in the UK whereever the individual resided!

Surely the easiest, most apinless and most profitable way of solving the whole thing

To my mind BTL are already taxed properly. We saved for deposits to buy our houses out of already taxed income and pay 40% tax on any profit we make.

We could have put all our money in to one large property but instead chose to live in a modest house and buy a couple of BTL as well. Other people (not all I appreciate, very aware we are fortunate) have this option but choose to live in the best house they can afford.

I don't know much about BTL. So is interest deductible on profits. It seems that BTL landlords are getting a very good deal indeed. Or am I misunderstanding. They are having profits subsidised by the rest of the taxpayers. Or so it would seem.

also BTL is a stress and a risk so good luck to people trying to make a go of it.

I don't agree with the renting out of sheds and sub standard accommodation which seems to have happened in recent years.

Not sure what you mean Vivienne - how are profits subsidised by the taxpayer?

We bought the properties using money saved from our salaries and hence already taxed. We declare any profit (rental income minus any costs) and pay tax at (for us) 40% to the taxman.

Unless you are thinking that I rent to HA tenants? I don't and know very little about how this works! As I mentioned up thread I have good quality student lets.

I was meaning Housing Benefit paid to tenants.

That is how tax works - amazingly you are taxed on your profits. If I buy tables for £100 and sell them for £101 I am taxed on £1 profit not on £100 which is money I never have. You cannot not allow deduction of interest from landlord's costs as that is often the same as the rent. If you did then no one would let out property and tenants would have nowhere to rent.

it is the same with businesses. If you borrow to buy your factory or fund new equipment that is an expense of the business in the same way that if you buy cloth to make into dresses you are not taxed on receipts from selling the dresses but your profits. Same with wage s- if you hire an agent to help with the buy to let or you have another business and pay someone £100k a year to work for you that comes off your profit. This is only fair as to tax someone on money they never have would be ludicrous.

stop pretending less by to rents means nowhere to live for people xenia. we've been round that circle 50 times.

OBface so you are making what - to me- sounds like a lot of money each month out of buying three houses instead of one. Well, good for you.

I still don't think you are the problem, the whole problem and nothing but the problem, btw, OBface. (This will be a massive relief to you).

All that's needed is a government that puts ordinary people first. We'd soon see how everything suddenly fell into place. The money needed to improve the lives of the majority would magically appear, and not just in this country.

And the rest of you (the wealthy minorities) wouldn't suffer, not really. You might have to downsize a little, or relocate, but you'd manage it. What with your hard work ethic and perfect health.

Yes BTL is taxed on profit at the tax rate of the individual so if tax rate is 40% then taxed at 40% (do we still have a higher rate so irrelevant to me I dont know)

however you are allowed to deduct costs like a business

even if you are an individual with one house

most BTL landlords will freely admit that the allowances are so generous they dont really pay any tax

not like someone on PAYE

yet it is absolutely not in any way essential to have a mortgage to run a BTL so why can landlords deduct the interest? (hence why loans are interest only, most landlords have no intention of paying them off for a variety of reasons) they are in fact effectively renting the right to charge someone a large mark up to put a roof over their heads based on massive gov/fiscal intervention and subsidies.

cant really see any reason not to tax them properly

l

It si not true allowances are generous. If your interest is half the rent you are taxed on the other half after other costs. If you interest is all the rent you have no income. Why on earth should you be taxed on money you don't have? It is not as if there is some invented huge allowance given to buy to letters. Also when you sell you pay 28% capital gains tax on the profit. Buy to let is highly taxed. Most buy to let landlords have one property and most do not make much on it.

I don't think everyone on the thread understands tax law. You pay tax on your profit. If you paid tax on money you don't have that would be ridiculous.

Buy to let landlords are ordinary people working very hard to house those who want to rent. they are not some kind of blue blooded different species on whom the poor ought to spit. They are regular mumsnetters many of who are just prepared to take ab it more risk and work harder.

It's such hard work sitting back and waiting for the rent to appear in your bank statement.

I know, I know, you're all out there at all hours fixing the radiators and unblocking the loos of your lazy tenants ...

I absolutely agree Solo, believe it or not I'm a Guardian reading leftie (yes really, at the same time as being a landlord ).

Southwest, we'd really struggle to avoid paying our tax as we rent through an agent and more to the point wouldn't want to. Our only real costs, other than the mortgage, come from any improvements we make to the house and yes these are deducted from our taxable income. I can promise you that we have had quite a hefty bill to pay in the last month or so if it makes you feel better!

Solo, I was referring to your earlier post re the government putting the ordinary man first! Cross posted...

Xenia PMSL at working very hard

really

of course allowances are generous as I said people are fairly open on most landlord forums (fora??) about not needing to pay tax

its like Barristers wigs and suits Xenia isnt it?

your wig is (normally ) only worn in court therefore you can deduct it, a suit can be worn elsewhere so you can't I'm right on that one arent I? a mortgage is not the same.

lots of property owners rent out houses they own outright a mortgage is not essential, lots of people have mortgages on houses they dont rent out a mortgage is not exclusive.

plus we are treating individuals like businesses when it comes to their BTL yet they are not they are individuals.

OBface renting through an agent has no implication for tax as far as I am aware but I could be wrong do agents legally have to submit returns to the inlane revenue?

I dont think some of you really understand how a lot of people are working BTL, lots of landlords have no real intention of selling (after all they are interest only so they dont own the properties) if they do make a profit it is easy money so be it, also a fair few will be intending on avoiding tax by moving into the property before they sell it.

Could you not also avoid tax by giving it to your kids?

Southwest - sorry I wasn't very clear. As we rent out through an agency we have little need to visit the property and therefore don't rack up any expenses that we could offset our tax with. I'm pro taxation anyhow and have no problem at all paying what I owe though I'm sure there are others who know how to play the game very nicely...

Yes I there is way of avoiding inheritance tax by gifting property to your children and this is exactly the sort of loophole the government should shut down. However, to do this you need to survive 7 years post 'gift' and the property sale would still be subject CGT.

We do intend to sell our properties. Our 2 student properties probably in 35 or so upon retirement and the half house I have with a decent amount of equity in a few years when we will look to upsize. Again worth pointing out that any money we make will be subject to CGT at our PAYE rate of 40%.

SW, tax is the pretty similar. If you live in a house you cannot claim all your interest against the rent. Anyway I am not a landlord so none of this can apply to me. I am just a dirty little right wing capitalist, free market libertarian who knows what is best for this country including the poor. We do exist and we know the right path for Britain.

If they had not propped up property prices and let them find the real market level we would have been far better placed as an economy by now.
A few greedy borrowers would have lost a bit but so what, it would have been the greater good.
QE has devalued our currency while imported goods have been driven up in cost as others have also said. These greedy pigs are concerned about simply saving their investments in the parasitical venture of building property portfolios on borrowed money.
Only a idiot would not have seen that these two things are the main cause of this misery of those priced out. It will all start to unwind probably this year.

Roneik - i'm not sure it's that nice to characterise all landlords as 'greedy pigs', please can you explain how I fit this description? And how will it all start to unwind this year?

It wouldn't be just landlords who would lose out should house prices dramatically fall. It would be every single one of my friends and in effect all under the age of 35 who have bought in recent years when house prices were already inflated.

Is this really fair? What will the catalyst be the price drop anyway?

^for the price drop^

Many mumsnetters are home owners who may not be that happy with a price drop. Indeed there are more homeowners than buy to letters.

There is not new propping up. For political reasons the state in recent decades has preferred private ownership of properties, not state (even Cuba now allows private ownership as does China although I would imagine not North Korea).

In the 60s (?) there was MIRAS - tax relief for those buying a house on their interest with no upper cap to start with at all. There is no capital gains tax on the profit made on sale of a family home etc etc. The state tends to know how unpopular it will be if people's life's work, their own asset loses huge value although even so we have had the 70s crash, the 90s crash and current stagnation in many areas if not drops in price for the last 10 years.