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?

"No it's for a fixed period with owning the place outright the end goal. "

A fixed period, but not a fixed price. Plus the issue is I have a large amount of capital, and I don't want to lose it for an overinflated asset.

"The rent money you are paying out now isn't doing anything for you for the future and you probably don't know how long you will be living there."

The rent is providing me with somewhere to live, which is definitely doing something.

"A fixed period, but not a fixed price. Plus the issue is I have a large amount of capital, and I don't want to lose it for an overinflated asset."

Property in London may well be overinflated, but property outside London is a lot less. It may be a bad idea to invest in London at the moment, but I believe that there are a lot of places in easy reach of london which have not had the same house price rises.

Rents rise with inflation. Mortages rise with interest rates. If we have a period of inflation with salary rises then mortgage payments fall in real terms. It is often possible to remortgage in later years to get a better deal when there is more equity in the property.

Fine - that's your choice, but your choice is to rent someone else's asset when you could own your own home. You have the means when other people renting don't.

Your rent money isn't doing anything for you for the future though - you are just spending capital.

Spend your money as you like (or don't spend it/invest it), but don't criticise others who choose to invest their money in a different way by buying a house or flat then renting it out to someone who either cannot afford to buy or chooses not to.

No wonder jealousy is a sin. It makes no one happy. The thread helps show that that is so. Plenty of landlords do much social good and provide a need councils and pension funds and the like are not choosing to meet.
My daughter has bought a flat and the only way she could afford that in London was to buy it and let it out as she cannot afford to live in it. I don't think it's fair to class her as a greedy money grubber. She is taking a huge risk, paid £2k letting agent fees, paid £2k to replace a boiler and as much again on other repairs for the tenants and of course over the next 5 years the property might drop in value. She makes no profit over costs at all. In fact losses which cannot be set against her employee earnings.

Nor do I think if it were made uneconomic for anyone other than local councils to let property out that tenants would suddenly find they had loads of property which they could buy or let. I think it would be an utter disaster which was exactly what we had when the rent acts were in and rents were £10 a year and people could stay for life and no one let to private tenants at all. in those days as council housing was very scare people often lived at home with parents for life or slept on sofas. It was not a wonderful regulated world with lovely property to let. It was an utter disaster. We tried it and it failed.

Also only in London have prices rises a lot. We sold my parents' house in 2008 and prices have risen barely 10% over 7 years in that region.

just putting interest rates up should get rid of buy-to-letters.

I am a landlord, not a buy-to-let as such, but a little flat I could not sell at the time (2008 crash) so I just kept it and rent it out to friends at a mates-rate.

Now, if I would have sold up I would have paid 40% capital gains tax on the increased value of the house, and then received virtually no interest if I had put the money in a savings account (interest is below inflation!)

So I, like other LL, are holding on to the property.

If interest rates go up, I may sell and put the money in a savings account. However, so far that just makes no financial sense.

The fact that capital gains tax is 40% also stops me from selling.

I guess there must be other accidental landlords like me? We use the rental income to pay mortgage on current home. I also pay tax on it, as it is part of my income.

"Spend your money as you like (or don't spend it/invest it), but don't criticise others who choose to invest their money in a different way by buying a house or flat then renting it out to someone who either cannot afford to buy or chooses not to."

Well actually if people choose to invest their money in ways that are bad for society, then I will criticise them. Although actually I wouldn't blame individuals for making rational choices, the blame is with the government over the last 20 years for making these choices so attractive. Hence my thread title 'we need new taxes'. This is about governments, not individuals. I want government action, I wouldn't presume that individuals would change without it.

This is where the system is wrong. Say In Bravepotato's case. She couldn't sell her flat. Which meant nobody could afford to buy it. So she let it out. But if the price was right somebody would have bought it. Not saying Bravepotato is wrong but it's the system that's wrong.

Yes I am coming round to the opinion that buy to lets should become a less attractive financial propostion. Then people might have a better chance of getting on the housing ladder.

Actually Aga it appears you are bitter that houses are over-inflated assets as you put it.

You need to go back further than 20 years to the Tory government of the 1980s and the Right to Buy policy which decimated local authority housing stock.

In your opinion it is 'bad for society'. Actually stagnation of the housing market and the knock-on effects of that are worse for society and the economy.

What good is your 'large amount of capital' doing for society?

aga - why does it always have to be 'more tax' though with the left wing. why not think of a better investment alternative - i'm sure like us most LL's would prefer not to be LL's at all and would happily take other pension investment options. removing the need for an annuity is a start (though lets hope everyone doesn't spend their pension at 65 on fast cars/holidays and then throw themselves on the state for looking after).

I don't think we have to go back that far. Houses were affordable in the late 90s, long after the local authority housing had been sold off.

Affordable housing is a good thing, just like affordable food. The fact that housing is no longer affordable is a reflection of monetary policy and fashions in investing, it has very little to do with Right to Buy.

I'm not sure what kind of question that is about my capital. It's providing for my children's education and our food and shelter, same as anybody else.

dreamingofsun, yes you could look at pensions certainly, e.g., the scrapping by Gordon Brown of the pension tax credit, but also the 15 year stagnation in share prices, which isn't so much a policy issue.

I think more tax is needed because this is not simply a matter of making other options better as actively acting against landlordism.

Something needs to be done I agree!

"I don't think we have to go back that far. Houses were affordable in the late 90s, long after the local authority housing had been sold off."

Housing has never been affordable. I remember being caught in the rent trap of the 1990s. In the 1990s interest rates were far higher than they are now. What has been unusual has been a long period of low interest rates.

AgaPanthers you are simply jelous. I don't see how your proposals will increase the amount of housing.

Lock authority housing is still being sold off. The discounts are taller than they used to be but a long standing social housing tenant can still get some level of reasonable discount if he purchases his home.

We don't have to go that far back to remember when housing was affordable. In fact, there is still plenty of affordable housing in many areas. It's just that many people don't want to live in the areas that they can afford. In the city I live in you can get decent two and three bed terraces for well under 100k. In some areas you can buy a house in reasonable condition for around £60k which is affordable for most first time buyers, especially if they are buying as a couple.
In other parts of the city you can buy a one bed flat for £300k. I hear people all too often telling me that they can't afford to buy when what they really mean is that they can't afford to buy a house in the area that they would prefer to live. I accept that the SE is very different and lots of areas are totally unaffordable for people on modest incomes, but the situation nationwide is very different.

Lots of things contributed to the huge inflation of house prices: lack of social housing, cheap interest rates making mortgages more affordable, banks lending more than three times a persons income, banks lending more than 100% of the house value, BTL increase. We can't turn back the clock completely and reverse all of those factors. We should be focusing on improving things by stopping The right to buy, building more social housing, making changes to increase tenancy lengths and landlord responsibilities, bringing disused properties back into use.
There are thousands of empty properties across the country, we should be campaigning for councils to refurbish them and rent them as social housing.
Taxes will just increase rents and make things harder for renters.

"Housing has never been affordable."

It has been more affordable than now, that's easily verifiable by looking at prices to income ratios and so on.

"In the 1990s interest rates were far higher than they are now. "

Not really
www.thehanley.co.uk/standard-variable-interest-rate-history_297.html

The base rate now is low, but mortgage rates haven't fallen as much. Also it's much better to borrow £100k at a high interest rate (which can only fall) than to borrow £300k at a low interest rate (which will surely rise).

Aga you continue - as you have done in every other thread you've started on here or contributed to regarding landlords/BTL/renting - to maintain a blinkered view.

You will never change your ingrained opinions therefore there is little point in attempting to debate with you as you are intransigent and dismiss everything which contradicts your original, narrow stand point.

I think you are jealous. You are certainly bitter.

You have a large amount of capital (your words) which you are using to provide for your children's education and your food and shelter. You won't spend it on buying a house, but you object when other people do if they do not then live in the house themselves. You want to dictate what other people do with their money and when you can't do that you want to tax them on their investments - an extra tax to those already levied.

Why don't you put your surplus cash to charitable use? In fact, if you were to support state education you'd have more of it available to use for the good of society.

There is nothing wrong with being a landlord so why should anyone be actively acting against it.

I actually think the major problem is the mortgage companies who have effectively taken away not just the first rung but the second rung as well of the property ladder. Myself and dp bought our first home with a mortgage. It was a tiny studio flat. Mortgage companies now do not give mortgages on studio flats. So we would have had to continue renting.
Also Mortgage companies now do not give mortgages on 1 bedroom flats that are under 30sq metres. So effectively writing off a portion of the population who would have been able to move into their new home with a lot less deposit sooner. So not renting for such a long time.
These places are now only available to be bought by BTL LLs with a BTL mortgage or some one paying cash.

Aga there are a number of businesses that are bad for society. Supermarkets, newsagent, petrol stations. For selling Tobacco, meat and petrol which all have a knock on effect on the air we breathe. So are you actively criticising those companies and advocating taxing those companies more? Or just BTL LL's who you believe are easy targets.

I cannot understand the logic with someone who criticises LL's for investing their money in a home for them and is quite willing to pay the LL's mortgage and then advocates the government put up taxes on LLs so that they will be paying more.

Should have said tenant will be paying more

Houses are affordable. They are just not affordable in the most popular places or in London and the South. But the prices are still far far too high as compared to income in many parts of the country. But the social housing thing is a different matter. I don't think it was an altogether bad idea selling off some of the stock. Because then people became responsbile for maintaining houses themselves so took a greater interest in them.

"
The base rate now is low, but mortgage rates haven't fallen as much. Also it's much better to borrow £100k at a high interest rate (which can only fall) than to borrow £300k at a low interest rate (which will surely rise)."

I agree with you. Banks are adding far more to the base rate than they did in the past. New buyers are proping up the failing banks. In the 1990s bulding societies added roughly 0.5% to the base rate and now they add about 3%. People with mortages from the 1990s have enjoyed a long period of 1% interest rates in many cases.

My brother is a first time buyer, single man, low income but decent deposit. Estate agents refuse to show him properties they have in his budget as they want them to go to landlords so they can get the managing agents fees. Only if he had £250k to spend on a one bed flat would they be interested in him as an owner/occupier.

"Aga you continue - as you have done in every other thread you've started on here or contributed to regarding landlords/BTL/renting - to maintain a blinkered view. "

I don't have a blinkered view, I have a considered view from considerable study.

My view is no more blinkered than yours, which you haven't changed either.

" You won't spend it on buying a house, but you object when other people do if they do not then live in the house themselves. You want to dictate what other people do with their money and when you can't do that you want to tax them on their investments - an extra tax to those already levied."

Yes, why shouldn't I object? Just as I would object to people, say, buying up the local swimming pool in order to close it down. Just because people are able to do X, Y or Z with their money, doesn't make it right. Others might not want to invest in Nestle, or a tobacco manufacturer.

And taxes are levied on top of other taxes always. If you buy a litre of petrol:

• it might have come from the North Sea where it is subject to 50% Petroleum Revenue Tax, plus Corporation Tax on profits.
• it has subject to 58p per litre of hydrocarbon duty per litre
• the retail price then has another 20% added on top of that in VAT
• the money you buy it with has been taxed at up to 62% income tax/employee's national insurance, plus about 15% in employer's national insurance

I am not dictating what anyone does with their money, I am saying that we have millions more people in private rented accommodation, millions fewer mortage-holding owner occupiers, and that this is bad for society, and that the government should act to disincentivise these choices.

If people want to invest in BTL that's their choice, but the choice should be made less appealing than it currently is.

By my recollection the interest rate was 6.25% in 1997 and it came down quite quickly whilst Gordon Brown was chancellor. The base rates charged to customers hasn't fallen in line with the base rate but it has fallen by a good deal. In a way I'm glad that the whole of the rate fall hasn't been passed on because I feel that people would have borrowed even more than they have and then really struggled if rates rise. I also think if the rate fall had been passed on in its entirety that house prices would be even higher than they are now, due to a false sense of affordability.

"I agree with you. Banks are adding far more to the base rate than they did in the past. New buyers are proping up the failing banks. In the 1990s bulding societies added roughly 0.5% to the base rate and now they add about 3%. People with mortages from the 1990s have enjoyed a long period of 1% interest rates in many cases."

That's hardly surprising though is it? The base rate is the overnight BoE lending rate. It doesn't represent the cost of securitising a mortgage over 25 years.

Gilt yields are:

2 years - 0.86%
5 years - 2.07%
10 years - 2.73%
30 years - 3.45%

That's what the government is paying to borrow money over those time periods, the banks will pay more than that.

The people paying mortgages at 1% are doing so because 10 or 20 years ago nobody would have dreamed of 0.5% base rates, and hence mortgage offers were made on the basis of base rate, which is no longer really representative of the cost of borrowing money over a 25-year period.

I must say I do agree with a lot of what Aga is saying. Though I am certainly not a socialist. Heaven forbid! But the rise of buy to lets has made it a lot harder for people to get on the property ladder and has increased house prices. I think buy to lets should be made a less attractive investment for landlords.

There should have been a clause forbidding the letting out of ex council houses.