Tax changes will drive landlords away say LSE

A new report from the London School of Economics (LSE) states that the recent buy-to-let tax changes will drive the country’s much-needed private landlords away from the private rental sector.

The report, called “Taking Stock”, analyses the private rental sector and its importance to the UK housing market.  It also claims that some landlords will pass their increased costs onto tenants, which will stretch household budgets and push home ownership further out of reach.  The report insists that small private landlords are the backbone of the private rental sector despite the Government focusing on improving the institutional build-to-rent sector.  It notes that the new tax measures mean UK landlords are now treated less favourably for tax purposes than many other countries.

These measures have included a 3% stamp duty surcharge, the removal of the wear and tear allowance and a reduction in mortgage interest tax relief.

The authors of the Taking Stock report, Kath Scanlon, Christine Whitehead and Peter Williams, reveal that the private rental sector has more than doubled in the last 15 years, now accounting for around one-fifth of all housing.

Despite Government initiatives to encourage institutional investment, the majority of homes are owned by small landlords with just one or two rental properties.

The report says “Even if institutional investors enthusiastically enter the market, individual landlords will remain dominant – as they are across Europe.  Shrinking the sector therefore does not seem a sensible way forward, given what we know about unmet demand and need.”

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