Right to buy tenant plan to cost LLs £50 Billion

Green_Bear

Cakeguts wrote: »

It is what is wrong with the education system of today. Everyone must have a degree in nothing. Everyone must pass all the exams so they make them so easy that it is difficult to fail anything. If you can write your name at the top of the paper you can pass GCSE etc. No one is allowed to be at the bottom. Everyone must be equal except that it doesn't work like that. Even if you pay everyone exactly the same wage some people will still have more money than others because some people are more frugal.



This business of taking money from the rich and giving it to the poor is already in place. It is called tax. There are many working class people who are wealthy. Not because they have inherited money but because they work in jobs that are well paid like bricklaying or plumbing or other trades that all pay more than degrees in nothing.



It gets me down because in the UK at the moment you are rewarded with large sums of cash for doing nothing.


I think the biggest inequality is between people on low incomes who pay tax and people on the top benefits who get them tax free paid for by the people on low incomes. You shouldn't be able to get more from the state than others are earning.



So for a given area if there are families living on the minimum wage that should be the top that you can get in benefits regardless of how many children you have.

I agree with most of your post.
20 years ago, I would have agreed with all of it.
But the wages of skilled workers has reduced over the last 10 years, in proportion to asset prices. That's what has raised inequality and probably led to the Brexit vote too.

Green_Bear

Chrysalis wrote: »

in every political decision there is winners and losers.

If I am been brutally honest, in regards to housing policy over the past 3 decades, landlords have been massive winners which is why BTL is booming.

Any "correction" to the market is going to hurt private landlords, no other way round it. The only thing that wouldnt hurt them is if the government guaranteed to cover all financial losses, which would be an absurb thing to do and cost the taxpayer instead.

With all that said I dont really support this idea.

I support masses of new council houses been built which of course will also hurt landlords. But I dont support any right to buy scheme. If governments just concentrate on people buying properties all the time, it solves nothing for those who "have" to rent.

What I would support (as I am also not a fan of deliberately ignoring a set of people, which in this case would be the landlords) is if the government started a mass house building scheme, we then maybe seen the BTL market crash, and then a flood of properties hit the market and prices shoot down, I would support the government buying those properties at a value of pre-crash as it would serve a purpose of both gaining properties to let out socially and also compensating private landlords for a government initiated market crash.

I think BTL probably peaked about 2 years ago. Certainly for the small time amateur landlord, holding in their own name.

John McDonall seemed quite adamant during his interview with Andrew Marr, that landlords would not lose money, under this proposed RTB.
I suspect what he meant was something along the lines of the tenant having the right to buy the house at the price the landlord originally paid. Probably minus any significant improvement costs. I wouldn't be surprised if it gets mixed in with CGT for the LL in some way too.

Interestingly, this new private RTB idea actually originated from a Conservative Party type 'think tank' / policy group.

The-Joker

2011 riots were a prelude to what’s coming

MobileSaver

Green_Bear wrote: »

landlords would not lose money, under this proposed RTB.
I suspect what he meant was something along the lines of the tenant having the right to buy the house at the price the landlord originally paid. Probably minus any significant improvement costs.

I suspect you are wrong and that if the proposal was ever implemented it would simply be the State that paid the tenant's discount.

I have probably read the same report as you which discussed "the price the landlord originally paid" and "improvement costs" and it was obviously unworkable. The example given was of a property that had doubled in value and the figures all seemed dandy with everyone being happy-ish.

Back in the real world there will be a huge number of rental properties where the current market value will be the same or even less than what the LL originally paid plus buying costs plus improvement costs. So you'd have a situation where tenant A gets 35% discount while tenant B next door could be told sorry no discount for you. Not exactly a vote winner or fair for tenants either.

Thrugelmir

Green_Bear wrote: »

But the wages of skilled workers has reduced over the last 10 years, in proportion to asset prices. That's what has raised inequality and probably led to the Brexit vote too.

Labour has become a global market. Companies are now setting up in Vietnam as it's cheaper to employ people there than in China. There's no right to a given level of wage.

Green_Bear

Thrugelmir wrote: »

Labour has become a global market. Companies are now setting up in Vietnam as it's cheaper to employ people there than in China. There's no right to a given level of wage.

This is what gives rise to protectionism (ie Trump, Brexit etc).

I think given significance of residential property to the UK economy, we are likely to see more pressure for redistribution of real estate, rather than wages etc.

Green_Bear

MobileSaver wrote: »

I suspect you are wrong and that if the proposal was ever implemented it would simply be the State that paid the tenant's discount.

I have probably read the same report as you which discussed "the price the landlord originally paid" and "improvement costs" and it was obviously unworkable. The example given was of a property that had doubled in value and the figures all seemed dandy with everyone being happy-ish.

Back in the real world there will be a huge number of rental properties where the current market value will be the same or even less than what the LL originally paid plus buying costs plus improvement costs. So you'd have a situation where tenant A gets 35% discount while tenant B next door could be told sorry no discount for you. Not exactly a vote winner or fair for tenants either.

Would you expect a landlord's CGT liability to play any part in this?

Obviously any LL forced to sell, will be forced to realise a capital gain (or capital loss) at a time not of their choosing. In SE England there will be LLs sitting on capital gains, so forcing a sale will be good news for tax revenue. And in the North etc, capital losses are only a theoretical loss of future CGT revenue. Many LLs will never get to offset these capital losses, as they are past their productive years of investing.

CGT rates have already been changed between shares and residential property. So no matter what happens with the Labour Party, BTL is gaining more attention from politicians.

MobileSaver

Green_Bear wrote: »

Obviously any LL forced to sell, will be forced to realise a capital gain (or capital loss) at a time not of their choosing.

Correct, there's also the small matter that most LLs will have a nice profitable business going with each particular property and they're being forced to give up future profits and any future potential capital gains; will they be compensated for future profits?

My own view is that it will never happen (at least not in the way the HPC crowd hope which is that LLs get no choice in the matter.) These think tanks come up with all sorts of weird and wacky proposals and, as I think someone else has already mentioned, they put them out there to see what the reaction from the public and business is to see whether it's worth trying to take further.

Green_Bear

MobileSaver wrote: »

Correct, there's also the small matter that most LLs will have a nice profitable business going with each particular property and they're being forced to give up future profits and any future potential capital gains; will they be compensated for future profits?

My own view is that it will never happen (at least not in the way the HPC crowd hope which is that LLs get no choice in the matter.) These think tanks come up with all sorts of weird and wacky proposals and, as I think someone else has already mentioned, they put them out there to see what the reaction from the public and business is to see whether it's worth trying to take further.

I don't think HMRC would class many small time LLs as running as business. Hence s24.
I would be very surprised if hypothetical future profits were compensated for. Has this ever been done before?

Green_Bear

MobileSaver wrote: »

Correct, there's also the small matter that most LLs will have a nice profitable business going with each particular property and they're being forced to give up future profits and any future potential capital gains; will they be compensated for future profits?

My own view is that it will never happen (at least not in the way the HPC crowd hope which is that LLs get no choice in the matter.) These think tanks come up with all sorts of weird and wacky proposals and, as I think someone else has already mentioned, they put them out there to see what the reaction from the public and business is to see whether it's worth trying to take further.

I agree.
But what it will do (and probably already has done) is move the political centre ground and general investor sentiment in a more anti BTL landlord direction.

I previously worked in the mining industry overseas. Mining companies employed 'political analysts' who had contacts in governments and provided a risk assessment of upcoming threats to the industry.

The BTL 'industry' in the UK is completely different.
I frequently read posts and hear from individuals in real life, who are blindly investing thousands in BTL without even knowing the basic requirements and risks involved.

if you suggested they buy mining shares in a diversified fund / IT / ETF - they'd look at you like you had two heads.

Yes, mining is a risky industry financially. One of the riskiest. But the political analysis does work itself into the share prices (after the insider trading has been done, obviously).