to think we need new taxes on Buy-to-Let

[AgaPanthers]

Over the last 15 years the number of new homes built in Britain is equal to the number of new homes under private rental. In other words, buy-to-let is in effect taking all new homes (though obviously some existing homes are going into btl and some new ones into owner occupiership so it's not a 100% match).

But there have been vast rises in the number of private tenancies, sharp falls in the number of owners with mortgages, and the consequences are many, from tattier streets (landlords don't spruce up homes with sitting tenants, the tenants don't want to plant the gardens because they might be kicked out next year) to families having to move house mid-school year because the landlord is kicking them out.

Today it's announced that the number of people made homeless from private tenancies has trebled in five years, and that private landlords are now the leading cause of homelessness. www.bbc.co.uk/news/uk-27940701

AIBU to think that this has resulted because of all the people piling into buy-to-let because it is deemed as more attractive than the alternatives (bank accounts, shares, small business, etc.), and that therefore we need new taxes to make buy-to-let far less attractive, given the social problems it causes?

The problem isn't BTL though, it's lack of housing, making BTL more expensive doesn't increase the number of houses - indeed it's possible that BTL has increased the amount of housing. Although that is obviously related to the move away from councils building houses.

The supply is the problem, not the people buying, and yes that certain "estates" end up almost purely being rented, but that was if anything even more prevalent when councils built everything in a large estate rather than mixed used housing, BTL has actually encouraged more mixed use.

What's needed are more houses, prices rise because of insufficient supply, not because of BTL people.

Many people have been forced into being landlords as they can't sell their home or it's in negative equity and need to move. We arnt making any money. The rent doesn't even cover our mortgage but we had to move. It's a nightmare tbh and we would love to sell. Then there's the tenants who damage things, don't pay the rent and y have to pay a fortune to evicted them even when you don't have the money to start with.

Fred I do think BTL is a big part of the problem.

Example - my colleague got into property early with help from his parents. Has used his ever increasing equity to enable him to buy more and more flats, purely because he already has some. So now he has very little debt, and about 10 flats, and it has been really quite easy for him to do this.

Meanwhile people who want to buy first time flats/homes can't afford to do so - it is very hard to save a proper deposit whilst privately renting which is a situation many people would be in..

I don't it's as simple as a tax on BTL but we do need something that makes BTL less attractive. We need more council housing to be built and for people to be able to buy homes. At the moment it's easy and attractive to be a LL and very hard to buy a first home or find secure tenancies ie council tenancies.

Taxes already exist. If the landlord decides to sell then he has to pay capital gains tax. If he makes a profit on his rent then he has to pay income tax.
Introducing more taxes will slowly push rent prices up and shrink the number of private rentals available. Many landlords are already making very little operating profit and if a property is damaged they will make a loss. The true financial benefit for landlords is in the long term value increase of the house and they will have that increase even if the house stands empty. Do you think landlords will rent out a property if the taxes mean that they make a loss and possible damages mean they make a big loss or do you think that some might consider it more worthwhile to leave the house empty and just check on it once a week whilst the value increases?

I take it that you don't have a buy to let OP

What about the BTL landlords creating a home for the many who wouldn't have anywhere to live because the council don't have houses. You know, the ones stuck at the bottom of the list for years.
If you tax the ll, they won't afford their mortgage and will sell, probably to a first time buyer who of course will benefit.
What happens to those still on the bottom of the list who can't afford to buy.
You haven't really thought this through.

There quite simply needs to be more social housing built and I say that as a letting agent ! It would reduce house prices and therefore rent and housing benefit expenditure. Which could then be used to build more social housing especially smaller retirement type that could be subsidised a little to encourage people to down size and free up larger family homes. There would still be a private rental market for BTL but it would not be financed by tax payers.

Hell yes. We need all the controls we can get on this parasitic activity.

For a start I'd like to see the ability for landlords to offset mortgage interest payments and wear and tear against income tax bills on rent removed and the loopholes closed that make it relatively easy for them to avoid paying capital gains tax when selling.

I think it would be a wrong move. It would just lead to more empty properties because the landlords would sit on their investment until prices went up.

What about the BTL landlords creating a home for the many who wouldn't have anywhere to live because the council don't have houses.

Well unless the BTL landlords are actually building a new property to let then they aren't creating anything.
If a BTL LL didn't buy the property then someone would buy it and live in it themselves & not need to rent anymore, probably freeing up a rental flat behind them.

I don't think BTL properties are in competition with council properties - private rents are much more expensive that council rents.

There was a thread discussing this recently, I'll try and link....

What about the BTL landlords creating a home for the many who wouldn't have anywhere to live because the council don't have houses. You know, the ones stuck at the bottom of the list for years.

I hate this 'we are providing a valuable service' argument the BTL-ers trot out.

No, no you are not. You have removed housing stock that once would have been accessible to first time buyers. You have profited from councils being banned from investing in the construction of new social housing. You are profiting (generally speaking) at the expense of younger generations who weren't as lucky as you to be born at the same time as you in a land of cheap housing and cheap credit.

I think the taxes on BTL at income tax and capital gains tax levels are probably about right. I'm not, in principle, opposed to private renting, and we do need some flexible short term private renting. But tenants really need more security. Most landlord are in it for the long term and want, at least some, long term tenants. Agents make a cut when tenants change and push up rents to get a bigger cut.
We need to make a longer term contract a viable alternative for landlords, as it is in most other countries. I lived in Belgium where there was a choice of a three year let or a three year let, making it difficult for expats who were unsure how long they would be in the country. I wouldn't want to see something that restrictive but families need secure homes.

I think it would be a wrong move. It would just lead to more empty properties because the landlords would sit on their investment until prices went up.

Um, you could make policies to tackle that too.

www.mumsnet.com/Talk/guest_posts/2104140-Guest-debate-What-should-we-be-doing-to-support-renting-families

I have rented many houses and BTL landlords have been the best in my experience because they see the house as a business not their home. The absolute WORST landlords we have had have been people who have rented out their home for whatever reason, far more insecure and landlords have an emotional attachment to the house which can make things quite difficult.

The main problem we have and why we cant buy a house is that all of the houses around us are more than 3 times our income and the banks have only offered us three time our income. So we are stuck.

I hate this 'we are providing a valuable service' argument the BTL-ers trot out.

No, no you are not. You have removed housing stock that once would have been accessible to first time buyers. You have profited from councils being banned from investing in the construction of new social housing. You are profiting (generally speaking) at the expense of younger generations who weren't as lucky as you to be born at the same time as you in a land of cheap housing and cheap credit.

^^ Eloquent and succinct summary of how I see the situation too. And I want to see it again in bold

What do you think would happen to these properties if BTL'ers didn't buy them? They wouldn't stop existing you know!!!

We have rented privately for the past ten years. It has cost a fortune and now, having only been in this particular property since September 2013, we have been informed that the landlord wishes to hike the rent by 16% from this September. Unless we agree we have to move yet again. It is really depressing.

I don't believe that additional taxes are the answer (it seldom is to any question). I would though be in favour of perhaps:

Removing the mortgage interest tax relief on btl mortgages;

Ensuring longer fixed-term tennancies; and

Building more homes/developments of mixed tenure (on the sacred green belt if necessary)

As a landlady myself, most buy-to-let landlords do already pay tax, and for the future may have to contend with capital gains tax too, as others have already mentioned.

There are big costs involved in buy-to-let too. It isn't as simple as buy the property, sit back with your feet up and wait for endless income to start rolling in.

Once a property has been bought it may need work doing to it before it can be let out in order to bring it up to required standards, comply with regulations etc.

Other costs can be:

1. Estate Agent fees (if you market it that way). These can take away the whole of the first month's rent in many cases.

2. Mortgages. Most private landlords have them on their properties, and they take a massive chunk out of your rental income.

3. Landlord Insurance. Best to have it.

4. Service charge. This applies if you own flats on the antiquated/feudal leasehold system in the UK. This can be hundreds of pounds each quarter, and can sometimes come with the added nasty surprise of ad hoc maintenance work carried out to communal areas.

5. Costs associated with evicting bad tenants or those who have not paid rent. Fortunately I haven't had to do this very often, but you do get problems occasionally.

6. Bank charges. I have had these when I have needed to re-shuffle things due to tenant changeover, or on the one occasion we had a bad payer (got rid of him, thankfully).

7. Ongoing maintenance costs of fixtures and fittings such as showers, cookers, washing machines if provided.

8. Cleaning costs at tenant changeover. You are supposed to do it, even though tenants should clean it before they leave. I do as much as I can myself, but still usually have to pay people to go in and clean the ovens & grill otherwise I never get finished in time to go home and look after my own family.

We do have enough costs and taxes to pay, thank you very much.

I understand the problems encountered by many young people trying to get onto the property ladder. Indeed, I have three children aged between 19 and 11. I worry about it for them. However, as someone else already mentioned, many of us needed other investments when pensions were raided by Brown and Blair.

We do have enough costs and taxes to pay, thank you very much.
And yet it is still a very attractive and profitable business for you, and all the while you are growing equity.

Um, you could make policies to tackle that too.

You can make whatever policies you like, enforcing it is a different issue altogether. What is to stop people from owning a 2nd property but putting it in somebody else's name. I could be the owner of our main residence and my husband could be the owner of our 2nd 'pension' property (hypothetical, as we don't have the money to buy a 2nd property). How would you enforce that? How would you enforce that for many hundreds of thousands of people? It's easy with a commercial landlord who has multiple properties, but not so easy with a couple who have 2 properties.
There will always be a loophole that people will use to own more than one property if they wish to do so.

if you make buy to let more costly for the LL by higher taxes, or put more regulations in place that make it harder to evict bad tenants then you will get fewer LLs.

we would get rid of our 2 properties and that would result in 2 families becoming homeless. From what they tell us, neither would be able to afford to buy a place, unless the property values reduced by about 50% - ie a massive crash which would destabilise the market and cause financial hardship especially for those just buying property.

both sets of tenants have been with us for 4-5 years - so i guess they are happy with the current situation.

dare i say this is another ill thought out plan that doesn't consider the wider implications.

if you wanted to get rid of LLs then one way would be to allow self employed people to build up better pension investments. though i still don't see that this would benefit our tenants as they would still get evicted if we stopped.

I'm sure many of you think that being a LL is a cushy number. It is if you have a decent tenant but not with bad ones - which are quite likely in our experience

Depends. There are almost no properties to rent in our village. It is very hard to live here if you can't buy. Some places need more rental properties, not fewer.

"the landlords would sit on their investment until prices went up."

Only possible for fairly well off landlords. Not for most of us. As I said, most of us do have mortgages on our properties. Empty properties aren't just lost income, they equate to a definite loss for the void period due to mortgage costs and in some cases also service charge.