My thoughts on the Budget

Mortgage Introducer

November 13, 2017

Angus Stewart (pictured) is chief executive of online mortgage broker Property Master

Philip Hammond’s Budget on 22 November is an opportunity for the government to press the reset button on the relationship between the state and an increasingly significant private rental sector.

If we look at the various pronouncements made by this government we can see that the provision of housing is a key priority.  But then again numerous factors in the UK – planning restrictions, an increasing population, straightened public finances – have conspired to make housing an issue for every government for at least the last 20 years or so, certainly since the public sector virtually withdrew from the business of building new houses.  So, what’s different this time?

The financial crash of 2007/2008 has been a jolt that has contributed to the percentage of people owning their own home going into reverse falling to its lowest level for thirty years according to the most recent English Housing Survey.  We now have what has been dubbed ‘Generation Rent’ and a general feeling that for many home ownership is no longer a realistic prospect – not an easy message for any Government, let alone a Conservative one, to hear.

Into this demand for housing has come an army of private landlords – in fact according to the study cited above the private rented sector has doubled since 2004.  Some of these landlords have fallen into this marketplace, possibly through inheritance or perhaps needing to move but not being able to sell their first house.  Others though have seen the potential of supplementing their income or indeed funding their retirement through buying and letting out properties.  For still others it has become more or less their full-time occupation.

Recent changes from this government have served to strengthen this demarcation between what we can call the accidental landlords and those who see property rental as more central to their livelihood.  We can point to the impact that tighter lending requirements, tapering tax relief on mortgage interest and now increased interest rates will have on the unintentional or relatively unsophisticated landlord.  Increased costs and increased red tape are likely to lead to many choosing to exit the market.  But will these houses really be bought by Generation Rent or by larger landlords looking to grow their portfolio?  My feeling is the latter and that what we are seeing is the greater professionalisation of the buy-to-let market and in some respects, that may be no bad thing.

Providing decent housing and secure tenancies is of course extremely important and we ought to be encouraging those landlords who see the rental sector as a strategic investment to be properly managed.  So, my hope for the Budget is that Philip Hammond sees the private landlords who have chosen to invest in this way as part of the solution to the housing crisis rather than part of the problem.  I would like to see tax being used as a carrot and not just a stick, for example, if the government wants more secure and family friendly tenancies then why not offer tax incentives to landlords that choose to provide such agreements? Similarly, tax relief could also be used to encourage landlords to improve properties, for example, make them more energy efficient.  Finally, the government could encourage landlords who do want to sell properties to sitting tenants by applying the new 20% rate of Capital Gains Tax in such circumstances which would also be in line with the government’s home ownership ambitions.

On 22 November we will see which way the wind is really blowing, landlords as purely a source of tax revenue (and we know the government has been pleasantly surprised by the amount raised by last year’s increase in Stamp Duty on properties bought to let) and an easy target for blame when it comes to concern around housing or as a strategic partner in delivering high quality, secure housing for those who need it.

Sign up to our daily email