Landlords could be offered capital gains tax relief to encourage longer tenancies and sales to tenants, following proposals from conservative think tank Onward.
It has called on the government to introduce a 50% capital gains tax exemption, or ‘landlord sales relief’, on existing rental properties that are sold to tenants who have lived in a property for three or more years continuously.
This would, in theory, encourage landlords to offer long-term tenancies and sell to sitting tenants.
Responding to the proposals David Smith, policy director for the Residential Landlords Association, said: “We welcome Onward’s acceptance of the need for more positive taxation in the rented sector which the RLA has long argued for. Indeed, last year, we suggested using Capital Gains Tax reliefs in a similar way to that being proposed today.
“Since then, a report by academics at Cambridge University for the RLA has argued that it is not clear whether a reduction in the rates at which Capital Gains Tax is applied would incentivise landlords to sell their properties to sitting tenants.
“A more suitable approach would be a tax relief on rental income for the provision of longer tenancies with a refund on the stamp duty levy for additional properties where a landlord is prepared to sell a property to a sitting tenant.
“Where Onward is wrong is in its call for landlords to disinvest from the sector. With the demand for private rented homes showing no signs of abating, and the Institute for Fiscal Studies today warning of the difficulties many young people have affording a home of their own, to choke off the supply of rental homes would leave many young people stranded and continuing to rely on the home of mum and dad for a place to live.
“The Chancellor should use his budget to scrap the stamp duty levy on additional properties where landlords are prepared to invest in property adding to the net supply of homes. This could include bringing empty homes back into use, new build properties or converting larger properties into smaller, more affordable units. To tax new housing supply given the current housing crisis we face is simply ludicrous.”