Landlord trade bodies say the political fight against tax changes goes on

Thrugelmir

Cherie Blair doesn't seem to have done a good job.

Landlord trade bodies say the political fight against tax changes goes on after High Court rejects legal challenge

Landlords may have failed to obtain a Judicial Review of landlord tax changes but political lobbying efforts will continue, industry representatives have said.

The High Court yesterday turned down an application for a Judicial Review of changes to mortgage interest relief (MIR) under Section 24 of the Finance (No 2) Act 2015.

Private rented sector landlords Steve Bolton and Chris Cooper had sought a review, claiming the MIR changes effectively meant they were being taxed on their turnover rather than profits; a situation organisations such as the Residential Landlords Association (RLA) said would lead to higher rents for tenants.

“Having provided support for this case, the RLA is disappointed it will not progress to a full judicial review,” said David Smith, the RLA’s policy director. “The campaign to seek changes that will address the more difficult aspects of recent tax reforms to the private rented sector must now focus on a political path.

“The Autumn Statement next month provides an important opportunity for the Government to make changes that will support the development of the new homes to rent the country desperately needs.

“The RLA has already met with Treasury officials to discuss the issue and it will continue to lobby for changes that are good for tenants and landlords, whilst recognising the Government’s limited financial room for manoeuvre.”

Richard Lambert, chief executive of the National Landlords Association (NLA), said: “This decision is ultimately disappointing not just for landlords, but for the tenants who will see their rents rise as a consequence of the changes to landlord taxation.

“While we have never been convinced that there was a solid enough legal case to overturn George Osborne’s decision, we hoped the Courts would be prepared at least to listen to the arguments.

“We congratulate Steve, Chris and the campaign team on their determination, perseverance, and their success in raising awareness and increasing the visibility and understanding of what will be a dramatic change to the ability of hard working people to provide homes for others.

“This issue has been the focus of the NLA’s lobbying for the past 15 months and, as the UK’s largest representative body for landlords, we are still committed to changing this damaging policy through political engagement and lobbying. We urge all landlords to join us in this fight.”

But campaigning organisation Generation Rent welcomed the High Court’s rejection of the Judicial Review bid.

“For too long the tax system favoured people who bought homes to make a profit over people who just wanted somewhere to live. The government’s recent tax changes should help to dampen speculation and give an advantage to people who have to date been shut out of the housing market,” said the organisation’s director, Betsy Dillner.

“These are long term measures whose success depends on house prices slowing down. Warnings about the impact on the overall supply of private rented housing are premature, and clouded by the result of the EU Referendum.

“Despite the prospect of mortgage interest tax relief being phased out for landlords paying the higher rate of income tax, the number of purchases with a buy-to-let mortgage increased by 14% in the 12 months since George Osborne announced the policy in July 2015.

“And despite the introduction of the surcharge in April, and the subsequent dip in sales to landlords, stamp duty receipts increased in the second quarter of the year from £1.75bn to £1.98bn.

“As important as it is to dismantle the damaging culture of property speculation, tax is only one part of the solution to the housing crisis. We need to build more homes for low income households – and the tax reforms mean there’s a new source of revenue for this. We also need to improve protections for tenants whose lack of rights mean they face a high risk of eviction.”

http://www.housingexcellence.co.uk/news/landlord-trade-bodies-say-political-fight-against-tax-changes-goes-after-high-court-rejects

westernpromise

I'm not really sure they get it yet.

There will be no "tenants who will see their rents rise as a consequence of the changes to landlord taxation". A landlord's costs have no bearing on the rent a given property fetches. If they did, then as interest rates have fallen, rents would generally have done the same. They haven't.

No, rents are instead determined by market value, which in many cases is constructively rent-controlled to the level at which housing allowance is locally set. Leveraged landlords have no power to just increase the rent out of hand. If they had, they'd have done so already.

In fact, I can foresee the precise opposite of this happening. I am worth having as your landlord, because I have one rental property with a trivial mortgage, and the rent amounts to about 6 or 7% of my gross income. If anything goes wrong I can afford to fix it instantly, I do so, and you never have to argue with me to get me to spend money. As a result, I've had I think four tenancies in 13 years.

A highly-leveraged landlord who non-manages the property himself and who penny-pinches about it is the landlord from hell. He will find the tenants won't pay more because the crummy marginal service he gives is not worth it at the current rent. They'll give notice instead, and I stand ready to nick all the best tenants.

Conrad

westernpromise wrote: »

There will be no "tenants who will see their rents rise as a consequence of the changes to landlord taxation".

No, rents are instead determined by market value,

I did a thread on the very issue of rents rising DUE to tax increases, and RICS state precisely this effect;


https://www.buyassociation.co.uk/2016/10/10/uk-close-critical-property-shortage-rics-warns/


October 10, 2016


The body of chartered surveyors has warned that, if no measures are taken, the 1.8m extra households looking for rent will be left in the dark by 2025.


https://forums.moneysavingexpert.com/discussion/comment/71431080#Comment_71431080

westernpromise

Conrad wrote: »

I did a thread on the very issue of rents rising DUE to tax increases, and RICS state precisely this effect;
https://www.buyassociation.co.uk/2016/10/10/uk-close-critical-property-shortage-rics-warns/

But talking about stamp duty, not the income tax changes.

Stamp duty is deductible against CGT anyway.

Conrad

westernpromise wrote: »

It's talking about stamp duty, not the income tax changes.

Stamp duty is deductible against CGT anyway.

Stamp duty is deterring Landlords buying and thus constraining rent supply (and again millions of resi buyers cannot buy due to mortgage criteria). Site agents are saying this is delaying builds.


Income tax most certainly is having an effect - I've already increased my rents this year by more than would have been the case, and will keep doing this as the tax is bought in.


You said people wont pay ad-hoc increases but mine did - they know rents are rising fast, and thus is due to Govt interventions.


We Landlords get our own hands dirty - those with pensions and ISA's sponge off the backs of workers, leaving the fund managers to do the dirty work for them

cells

Rents are set by tenants always have been and always will be. Landlords will accept almost any rent. The question is then what makes tenants bid up the rent to current levels and what might make tenants bid a higher or lower rent in the future

Bluebirdman_of_Alcathays

Conrad wrote: »

Stamp duty is deterring Landlords buying and thus constraining rent supply (and again millions of resi buyers cannot buy due to mortgage criteria). Site agents are saying this is delaying builds.


Income tax most certainly is having an effect - I've already increased my rents this year by more than would have been the case, and will keep doing this as the tax is bought in.


You said people wont pay ad-hoc increases but mine did - they know rents are rising fast, and thus is due to Govt interventions.


We Landlords get our own hands dirty - those with pensions and ISA's sponge off the backs of workers, leaving the fund managers to do the dirty work for them

If the market could bear your higher rents, why weren't you charging them earlier? Why stop at what you're charging now - you seem to think LLs dictate prices - so go higher, surely?

chucknorris

Bluebirdman_of_Alcathays wrote: »

If the market could bear your higher rents, why weren't you charging them earlier? Why stop at what you're charging now - you seem to think LLs dictate prices - so go higher, surely?

I'm not agreeing with the hypothesis that Landlords set the rent, that isn't true, the market does. I did however want to point out the advantages in not charging the max possible achievable rent, and sweating the property, IMO there are good reasons to take a lower rent than achievable:

1. Wider choice of tenant (it is extremely important to me to get the right type of tenant).
2. Tenant will stay longer, a lot of work is generated at changes of tenancy (long term tenants reduce this).
3. Most tenants will 'play ball' if they consider that they are on a good deal and are being respected, my tenants usually reduce my efforts when the tenancy does eventually change by showing prospective tenants around (this also helps build new relationships with the incoming tenant because they know from the previous tenant what I am like).
4. Reduces/avoids rental voids, there isn't much point in getting 5% more rent, if you also end up having a 5% to 10% (or longer) void, caused by asking for 5% 10% higher rents. I have never had a rental void in over 25 years with multiple properties (currently we have 7 investment properties, excluding the one currently on sale), except where I wanted a void between tenancies to do work, e.g. fitting a new kitchen/bathroom etc.

Out,_Vile_Jelly

Conrad wrote: »

S
We Landlords get our own hands dirty -

Yes, when people are asked to name a challenging job they always name LL above nurse, carer, miner, farmer etc. It's famously a massive physical and intellectual challenge to apply for a BTL mortgage.

nubbins

Out,_Vile_Jelly wrote: »

It's famously a massive physical and intellectual challenge to apply for a BTL mortgage.

Yeah, thats all you have to do as a landlord :rotfl:

Thrugelmir

chucknorris wrote: »

I'm not agreeing with the hypothesis that Landlords set the rent, that isn't true, the market does. I did however want to point out the advantages in not charging the max possible achievable rent, and sweating the property, IMO there are good reasons to take a lower rent than achievable:

1. Wider choice of tenant (it is extremely important to me to get the right type of tenant).
2. Tenant will stay longer, a lot of work is generated at changes of tenancy (long term tenants reduce this).
3. Most tenants will 'play ball' if they consider that they are on a good deal and are being respected, my tenants usually reduce my efforts when the tenancy does eventually change by showing prospective tenants around (this also helps build new relationships with the incoming tenant because they know from the previous tenant what I am like).
4. Reduces/avoids rental voids, there isn't much point in getting 5% more rent, if you also end up having a 5% to 10% (or longer) void, caused by asking for 5% 10% higher rents. I have never had a rental void in over 25 years with multiple properties (currently we have 7 investment properties, excluding the one currently on sale), except where I wanted a void between tenancies to do work, e.g. fitting a new kitchen/bathroom etc.

So many people get their model hopelessly wrong Chuck. Over the years seen many a promising business fail as the aim is purely to screw the customer. Whereas the real art of business as you describe is to take the longer term view. That's where the real money is to be made. People are just so impatient for jam today rather than gold tomorrow.