How can FTBs be helped?

HugoSP

Having read a few threads on BTLs and holiday home owners snapping up houses and pricing out FTBs, and indeed other people who need to sell and buy for whatever reason. I saw a few good suggestions about how FTBs could be helped.

Hence I have decided to create a thread to capture and discuss these. I hope that everyone who commented on the other threads will join in, but in case I do end up talking to myself, please tell my wife and kids that I love them when I am locked up

My suggestions:

1) Tax breaks focused on FTBs. Reintroduction of MIRAS for the first few years of the mortgage provided that the buyer clearly does not have the proceeds from another house to put into this. Such people would include proper FTBs, divorcees etc. IMO perhaps the best way would be by individual HMRC application for this benefit, with an appeal system. Not perfect but a start. IMO applicants would need to be buying low cost housing to qualify, unless they could convince HMRC that no such properties were in the area they needed to live in/move to.

2) Property owners (BTLs and Owner Occupiers) could be given incentives to sell their property at say 25% below market value in return for tax breaks over say 5 years, a one off CTG break or a combination of the two. These houses would then be clearly defined in title and would be subject to maximum inflation price rises for the next say 20 years. In addition rents for such properties (owners may need to live away for whatever reasons) would be subject to ceilings rising only with inflation as a maximum. Such properties could not be divided, combined etc but increases in value as a result of imrovements made, such as extensions or remodelling would be assessed on a case by case basis at the owners cost. This would allow separate price rises as a result of these improvements as a proportion of the value of the house. I would not want to discourage owners from making improvements to their properties.

3) Some FTBs depending on income, occupation or area could be subject to an assisted purchase scheme. This would be available on any qualifying affordable home. That is to say that a nice litte 3 bed victorian terrace may well qualify as would a modern starter home, but a 5 bed detatched executive home would not. This scheme would come in the shape of an investment in the home. Up to 20% in each home could be invested on behalf of the government. There would be no rent or interest for the beneficiary to pay and the agency running the scheme would simply hold a % stake in the house. So, when it was sold the same % stake would be refunded to the scheme. A long term stable housing market would ensure that money is not lost. Infact it may at times seem like a good investment for the government! Homeowners would be profided with incetives to buy the stakeholder out if that suited them to do it.

4) I see that there is some compulsary purchase of empty properties that are ripe for conversion or renovation by councils. I would further like to see voluntary schemes in operation. My old street of victorian terraced houses in Leicester included around 5% of council owned properties. These were bought by the council for various purposes when prices were low. Fortunately there were no problem families in amongst the 95% of privately owned homes, so it worked very well.

5) Long term derelict property or real estate must be redeveloped in preference to greenfield sites. It is IMO negligent for planning authorities to release new land for building when suitable brownfield sites in the same areas remain undeveloped. The planning authorities in my area seem to be ready to grant permission for brownfield site redevelopment that does not include building in a back garden. I am not condenming greenfield site construction but feel that run down areas need to be redeveloped first.

6) There are a number of properties that naturally lend themselves to conversion into residential units, and larger houses that would split into multiple quality dwellings. My current project involves such a split. One early/mid victorian dwelling with redundant shop and large garage into 2 well proportioned 3 bed dwellings. This will add one dwelling onto the housing stock.

7) In recent years Manchester saw wholescale demolition of several 3 bed victorian terraced properties to construct millionare appartments. I say, what a waste! These had devalued over time as communities grew weary of the area and relocated. As wholesale abandonment of streets took place properties were changing hands for £1500! Manchester City Council IMO should have taken out CPOs on all unnocupied properties, then reintroduced them in a controlled manner back into the housing stock. I do believe that in some areas similar houses were being sold back to the communities for around £500 a piece on the condition that buyers put up £10k to refurbish them.

8) Self help schemes involving either new build or renovation can go a long way. I know of one scheme that provided land at a cost to individuals who got together and build their own houses. There were some tradesmen involved and also other people with few skills but lots of dedication. Similar schemes could be applied to both newbuild and renovation. Such a scheme would see inividuals purchasing land or shares in a site/property, then developing it without costing labour and combining their purchasing might to lever great prices on materials.

Gorgeous_George

Build more houses. Proper houses with gardens and two bathrooms. If lots of greenbelt land was freed up for new towns to accommodate the rise in population, property prices would fall.

Allow councils to build mobile home parks to house those who choose to have children without the means to support them. This would reduce demand for BTL properties in the FTB category.

Allow tenants to buy their LL's property (where the LL agrees) by splitting any CGT liability three ways (LL, tenant, taxman).

An alternative to the above is to lower the population. Voluntary euthanasia. Introduce bird-flu. Have a war.

Maybe encourage married heterosexuals to live together by introducing the married person's tax band.



GG

HugoSP

Gorgeous_George wrote: »

.....An alternative to the above is to lower the population. Voluntary euthanasia. Introduce bird-flu. Have a war.

Maybe encourage married heterosexuals to live together by introducing the married person's tax band.



GG

Where do we put the trolls - under the bridge or in the river:rotfl:

Guy_Montag

While we're discussing this, can we make it clear to, for example, Eastliegh council that allotments are not brownfield sites?

I don't like keyworker schemes, or FTBer MIRAS - I don't like anything that gives some people an unfair advantage - I tend to feel these lead to abuse & I also don't believe there's such a thing as a keyworker - we all support the economy in some way or another.

1) Capital gains tax at the point of remortgage - makes it harder to build up massive property empires.

2) Require planning permission to convert a primary residence into a secondary one.

3) Allow people to buy pieces of agricultural land contiguous to current settlements to build their own primary residence subject to a tapered CGT starting at 100% dropping to 0% after one decade.

4) I'm not sure if this would help the market - but married couples should be able to share a combined tax allowance.

HugoSP

Guy_Montag wrote: »

While we're discussing this, can we make it clear to, for example, Eastliegh council that allotments are not brownfield sites?

I don't like keyworker schemes, or FTBer MIRAS - I don't like anything that gives some people an unfair advantage - I tend to feel these lead to abuse & I also don't believe there's such a thing as a keyworker - we all support the economy in some way or another.

1) Capital gains tax at the point of remortgage - makes it harder to build up massive property empires.

2) Require planning permission to convert a primary residence into a secondary one.

3) Allow people to buy pieces of agricultural land contiguous to current settlements to build their own primary residence subject to a tapered CGT starting at 100% dropping to 0% after one decade.

4) I'm not sure if this would help the market - but married couples should be able to share a combined tax allowance.

Guy, I can sympathise with your first para, but I don't entirely agree with it. It's a hard fact that stockbrokers will be able to afford houses in some areas whist nursing staff and doctors can't. If I'm hit by a bus I know who I'd prefer to be seen by:D . I'm not saying that nurses should be able to afford the same homes that stockbrokers can, but that some people, by virtue of their employment are in a worst situation than others.

There will be abuse of any system that is introduced, whether it is base on one of my ideas, one of yours or neither. That is also a hard fact.

Taking your ideas by number:

1) Such a tax would have the same effect as IHT. High price rises or prices would force people out of their houses when they came to remortgage. Imagine trying to find another mortgage for a house that increased in value by £50k over the last 5 years, then having to stump up £20k to change mortgage provider. That would kill any competition in the finance market as you would be stuck with the same lender for the duration of the mortgage. Having been shafted on a regular basis with Halifax on a previous house we lived in I was glad as a home owner to be able to go into the market and find another mortgage provider. Also, competition meant that the Halifax couldn't shaft me as much as they wanted to.

2) I like this one. It is a direct legislative approach that applies firm control on community development. I assume you mean by a secondary residence, a holiday home? If I'm right This wouldn't give homeowners an advantage over BTL investors who simply want long term tenants, but would stem the HH conversion of housing stock in quaint little villages. However I would not avocate requiring planning permission to rent houses out on a BTL, as many homeowners who may take a posting abroad or in another part of the UK would see this as a perfectly acceptable way of paying the mortgage, or generating the income to support a second home as tenants elsewhere.

3) This appeals to me as well. However, look what happened with council houses. After 3 years people could sell at market value and not have to compensate the LA. IMO such developments would need to be ringfenced in some way to limit the appeal for speculation.

4) I'm not sure what you mean with married couples sharing a combined tax allowance. This is already possible with CGT etc that does not apply to primary residences anyway. Could you explain in more detail?

iom_dave

It's quite easy to sort out the tax:-

Either reintroduce mortgage relief for all or end interest relief on residential property.

If I buy a house, rent it out and live in a room in another nearby I reclaim interest at 40% against my rental income

I live in my house, i don't.

Remove the 3 years for any reason exemption in the CGT along with 3 years for living in it for any period - give all LLs 6 years CGT exemption. Also get the tax off Landlords!

Also monitor inflation correctly - build in the cost of housing - not currently included - this has a direct impact on interest rates

Other issues...
Demand LL keep their properties up to the correct fire regulations and other standards.

Build more.

Realise that renting is currently better in terms of cashflow (ignore capital gain - may disappear!).

Guy_Montag

HugoSP wrote: »

Guy, I can sympathise with your first para, but I don't entirely agree with it. It's a hard fact that stockbrokers will be able to afford houses in some areas whist nursing staff and doctors can't. If I'm hit by a bus I know who I'd prefer to be seen by:D . I'm not saying that nurses should be able to afford the same homes that stockbrokers can, but that some people, by virtue of their employment are in a worst situation than others.

There will be abuse of any system that is introduced, whether it is base on one of my ideas, one of yours or neither. That is also a hard fact.

Taking your ideas by number:

1) Such a tax would have the same effect as IHT. High price rises or prices would force people out of their houses when they came to remortgage. Imagine trying to find another mortgage for a house that increased in value by £50k over the last 5 years, then having to stump up £20k to change mortgage provider. That would kill any competition in the finance market as you would be stuck with the same lender for the duration of the mortgage. Having been shafted on a regular basis with Halifax on a previous house we lived in I was glad as a home owner to be able to go into the market and find another mortgage provider. Also, competition meant that the Halifax couldn't shaft me as much as they wanted to.

4) I'm not sure what you mean with married couples sharing a combined tax allowance. This is already possible with CGT etc that does not apply to primary residences anyway. Could you explain in more detail?

Since we agree on 2 (I was refering only to HH & not to BTL) & 3.

0)I get your point, my further arguments are that it becomes difficult to know who is a keyworker (a nurse? a hospital cleaner? a hospital plumber? a plumber who does contract work for the hospital?, the chap who designs the widget that goes up your jap's eye to check for the clap?) secondly there is the rather cliched argument that without stockbrokers we wouldn't have nurses.

1) CGT only on your BTL empire, not on your current property. Stops you doing what that awful couple in kent have done & bought every house in ashford from the equity in the first one. Or at least slows them down.

4) This isn't really relevant.

epz_2

While BTL'ers are an undesirable hinderance they are purely a symptom of a lack of housing stock, in a balanced market they would have no motivation for capital gains and hence would likely become a replacement for incompitant councils.

Holiday homes on the other hand do cause havoc depopulating usually sparsely populated areas and robbing them of the service infrastructure needed to sustain the local population. I would imagine a 4-5+ multiple of council tax for holiday homes and passing the savings directly back to locals, primaraly at the lowest end of the tax band.

Think about it like this if a low income local family buys a band A property and only has to pay £10 a month council tax while holiday home guy needs to pay £5000+ a year just to own it then not only does the income differential get lowered but also £5k buys a nice holiday and you can change destination. oh and i would bet it would result in a shed load more people getting people buying in france who have the balls to deal with these problems.

The real biggie is to force the council to do what is interest of everyone, target specific types of new builds based on population predictions and cut the councils money if they dont make it happen. if they are willing to cut peoples bin service for an eu directive you can bet they would get off their !!! and start rezoning, compusery purchasing and generally creating the oppertuneites for people to build more homes.

oh and empty properties should be charged full tax rate, nobody pays it in 10 years(assuming they aint got altzimers etc) and the house gets given to the council for resail at public auction.

HugoSP

Sorry for two posts in a row, I just thought it would be better to break up my ramblings. A couple more points come to mind.

What we probably need is a scheme or schemes to maintain a level of housing supply that is simple to operate. I don't know if such a solution exists or could be conceived. Taxation gets complicated and experts always try to get around it with varying degrees of success. However, well drafted legislation, such as Guy's idea about requiring planning permission to use properties as holiday homes, which could be applied retrospectively IMO, could put everyone on the same footing - regardless of income, or financial or other disposition.

Also, there are several types of property investment. The four main ones are:

Holiday home owners
BTL investors
Property Developers
Speculators

Some people who fiddle around with property may fall into two or three categories. They may renovate then let for example.

Holiday home owners take a property out of the housing stock and turn it into holiday accomodation. This creates problems for those that need it as housing. If housing is more important in an area than holiday acomodation then this area needs to be addressed. The flow of conversions of this nature needs to be stopped altogether IMO. Villages should be rationed to a % age of holiday homes. Similar schemes are operated in parts of Florida. Some houses are not permitted to become holiday homes.

BTL Investors. These guys buy a property and make it available to tenants. Many BTL investors are divesting themselves of stock at the moment. However, they have not taken a house out of the housing stock. They have simply responded to market demand. For a number of reasons tenants are out there and need quality homes. Some will want to buy, some will not, some cannot. I don't think it is possible to ever see close to 90% home ownership. Some european countries have a majority of tenants as households. Home ownership is a primarly british thing in Europe.

OK I hear those who say that BTL investors have robbed FTBs the chance to get on the housing ladder. On a case by case basis there may be valid arguements, but ask some questions.

When it was cheaper to buy than rent, why didn't all those who could buy and wanted to, do so?

Now it is in the short term, cheaper to rent than to buy, why don't the would be FTBs stick it out, pay cheaper rents until the market corrects itself then pick up the bargains then?

The reason that there are FTBs out there who are not happy to simply respond to market forces and take the cheapest option is because they want somewhere to call their own. I can empathise with that. Unfortunately it is IMO this wish that is pushing up house prices at the moment. BTLs are purchased by and large on economics.

Property Developers (and I am not talking about new home builders) IMO as a population have a positive impact on the housing stock. Often they may redevelop or renovate a property bringing it back into haitable condition. I did this with one I now rent. In many cases they will convert or rebuild to provide more dwellings than there were before.

Speculators. These fall into a number of subcategories, but I am really taking on board those who simply buy property like some buy shares etc. They are happy to see it empty whilst it increases in value. They often have little impact on the housing stock but do nothing to increase supply. The current CGT system encourages quick turnover in a rising market. However I am mindful of a piece of land right in the middle of Bath that someone is simply keeping as a nest egg. This land is actually the site of a bombed out house and would certainly be right for development as it lies between two terraced houses.

As a result, I say penilase HH owners and speculators, leave BTL investors alone and reward property developers.

Property developers are beneficiaries of some VAT concessions anyway, though simplification of this could be entered into. In addition I would like to see consessions to those who bring uninhabitable property back into the housing stock.

BTL investors are simply akin to any other investor or business entrepreneur, even if they are simply trying to get their own home to work for them whils they are living away. They see what they think is a demand and they respond to it. Sometimes the get it right, other times they get it horribly wrong. Sometimes they prevent a homeowner buying the house. Other times (especially in the current climate) they may put someone in a house who could not otherwise afford to live there. As a result I say leave the tax system as it is. They don't get all the same tax breaks as other entrepreneurs, and as a BTL investor I am not complaining.

HH owners range from the up country toff who uses his pad for 4 weeks a year and doesn't share it out to those who run a commercial business and aim for maximum occupancy. They do not need any more help either.

Speculators need no help. In fact I would eliminate taper relief to those who choose to keep property unnocupied for long periods, whilst they are not striving to put it to use.

HugoSP

Guy_Montag wrote: »

Since we agree on 2 (I was refering only to HH & not to BTL) & 3.

0)I get your point, my further arguments are that it becomes difficult to know who is a keyworker (a nurse? a hospital cleaner? a hospital plumber? a plumber who does contract work for the hospital?, the chap who designs the widget that goes up your jap's eye to check for the clap?) secondly there is the rather cliched argument that without stockbrokers we wouldn't have nurses.

1) CGT only on your BTL empire, not on your current property. Stops you doing what that awful couple in kent have done & bought every house in ashford from the equity in the first one. Or at least slows them down.

4) This isn't really relevant.

Guy

0) To run the country effectively all skills are needed in all parts of the country. Is it fair therefore that the nurses and doctors have to spend several hours commuting to work whereas the stockbrokers can just nip across the road? Every community needs a balance of occupations. I don't doubt that stockbokers have made a huge contribution to wealth manangement and the creation and development of these communities but other occupations are needed to help maintain order and wealfare.

1) How would such a scheme work in practice? The way I see it is that I would be penalised every time I refinance a BTL property for any reason, even if I fall out with my mortgage provider and want to change, let alone to take advantage of a new rate. This would remove competition in mortgage lenders in the same way that it would for personal property. In addition I could avoid this by raising finance on my own home to purchase a BTL.

I saw a program about that Kent couple. They aren't actually taking houses out of the housing stock though. As my previous post has outlined they are keeping them in the housing stock and I would argue are providing an alternative method of maintaining a household to their tenants. The charge below market rent to maintain occupancy. Tenants have the option of leaving and buying their own house if the market conditions are right. Or they can carry on renting if this represents a saving on mortgage interest payments.

I will repeat the point I made in my post above (not my previous reply to you) The only reason that people seem to want to buy is because they want somewhere they can call their own. I can understand that - I like having my own house.

BTL LLs like myself and that couple in kent make hard nosed business decisions. If a house can make a profit we will consider buying it. If it cannot we may not. Hard nosed BTL decisions will not produce a market where prices have risen so much that we would lose some 20% of turnover, because it is cheaper to rent that to pay just the interest on a mortgage. For most of us that is simply unsestainable even in the short term. Something else has to have pushed the market as far as it has been.

I think that the market is where it is because of peoples' aspirations and the range of mortgages available to homebuyers. BTL finance is not nearly as competitive. We pay about 0.5% more interest than you do and we do NOT get the perks such as free valuations and cashbacks in the same way as you do. In addition the tie in conditions are much more stringent. Even if I sell a mortgaged BTL I have to pay a 5% penalty to the mortgage company, because I cannot transfer the mortgage to another property. If you move home the tie in clauses don't apply as the mortgage companies accept that you may have to move to secure a new job etc.

Perhaps the BTL profits are subsidising homeowner morgtages?

I like to think I provide decent fit for purpose accomodation for my tenants. The fact that tenant turnover is very low for me seems to indicate that they are happy where they are. Our own house is in much worse condition :rotfl: . Actually I am serious - it is!

HugoSP

epz wrote: »

While BTL'ers are an undesirable hinderance they are purely a symptom of a lack of housing stock, in a balanced market they would have no motivation for capital gains and hence would likely become a replacement for incompitant councils.

I would certainly agree with your comment on holiday homes. I have made my feelings on this subject clear in another post.

However I will take issue with you para on BTLs. I move that they are not a hinderance as we, purely in a BTL capacity do not actually add or remove houses from the housing stock. We invest in the hope that over time the overall benefit in owning the house outweighs the costs of doing so. If you read my latest reply to Guy you will see why I think that BTL LL are not at least currently causing problems for would be home owners. The reasoning is there so I won't repeat myself. In fact the current trend seems to be for BTL investors to sell stock. The aforementioned post offers my view on why would be homeowners are struggling to buy at the moment, and I don't in all honesty think that BTL investors are driving up the market, on the contrary their current actions are steming price rises.

I will agree though that if the market was far less volatile there would be less incentive to invest. However when a long term investment looks like a low risk medium gain option, some people will go with that, even, as in this case, it comes down to the fact that we feel comfortable with dealing with the everyday running of the portfolio.