We’re punishing landlords and helping buyers but we need to talk about tenants, argues Felicity Hannah.
We're punishing landlords to help new buyers but we're not thinking about the tenants who can't buy and are hurt by the changes.
I’ve just re-mortgaged my buy-to-let property. It's a five-year fix, since you ask – I can see that the Base Rate is almost certainly going to keep rising so I want to ensure my rental property stays affordable.
Because it’s not just me that relies on my investment property being affordable, it’s also my excellent tenants. I’ve not raised their rent in the last two years and I don’t want to, even though that means my property is bringing in less than the going rate.
And I know I’m not alone. A survey from the Residential Landlords Association in 2016 showed that 56% of landlords planned to hike rents to offset the impact of the changes to mortgage interest relief.
But that means that 44% are frantically trying to avoid hiking rents for their tenants.
I don’t make much of a profit on my buy-to-let. Truth be told, we were originally accidental landlords; our investment property was actually our first home.
Still, we have the property now and we have paid a lot of money into it to claw our way out of negative equity. We’re less interested in making a profit now and more interested in our long-term value.
I’d like to see our former home as a nest egg and an addition to my pension. But I also don’t lose sight of what it really is – our tenants’ home.
And I really wish the Government would think about that too.
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What about the life-long tenants?
The growing costs resulting from recent Government actions are making buy-to-let less affordable as an investment.
And that’s why I am working hard to keep my costs down – not because I am a grasping, greedy landlord but because I am trying so hard to avoid hiking rents for my sitting tenants.
Fortunately, by remortgaging, I have saved enough that I can keep the rent flat for a further year at least.
This should cover the rising cost of being a landlord while also protecting my property from any hikes in Base Rate. Like many landlords, I’m also managing the property myself rather than through an agent, again to keep the costs down.
Undeniably, now is a tricky time to be a landlord. But that’s not my gripe. I’m not suggesting there should be special allowances for landlords like me, certainly not when so many people can’t get on the property ladder at all.
However, no one seems to think about the tenants who suffer as landlords are penalised. I’m not suggesting that is a reason to roll back the changes to landlords, but clearly not enough is being done to support those tenants who may never be able to afford to buy.
And they need help.
Rising costs
The Government has made no secret of the fact it’s penalising landlords.
George Osborne hiked Stamp Duty for landlords, exempted them from his cuts to Capital Gains Tax and then demanded they pay tax on turnover rather than profit.
He openly said this was to balance the odds in favour of first-time buyers who often find themselves competing with cash-rich investors.
On top of that, buy-to-let mortgage rates have been rising since the Base Rate was hiked.
Now, I understand why landlords are being targeted.
First-time buyers are struggling to get a foothold on the ladder. House prices are rising. There’s a shortage of homes and investors have previously been snapping up the homes that new buyers have wanted.
I get it.
But my tenants may not be in a position to buy. If I decided that buy-to-let has become unaffordable and that I needed to sell my property then that might well benefit a first-time-buyer – it’s undeniably a perfect starter-home.
However, that would also hurt my tenants because I would have to give them notice. It would cost those tenants money too; moving home means paying the cost of shifting furniture, finding a deposit and possibly taking time off work.
I don’t think it’s necessarily wrong to rebalance the market on the shoulders of landlords, although I obviously would rather that wasn’t the case.
Yet rebalancing the market in favour of first-time buyers at the expense of tenants who are not in a position to buy doesn’t seem fair at all.
Especially when those first-time buyers are also benefitting from a range of government schemes including Help To Buy and the Stamp Duty break.
Now read: What’s REALLY happening to house prices?
Government needs to step in
Action like ending Stamp Duty for new buyers may be welcome – although there are plenty of people who say it will not actually help once the market adjusts – but it won’t help those who have not been able to afford to save a deposit.
The only thing that can help them is to ensure rents remain affordable, or return to affordable levels in those areas where tenants are already struggling.
A study carried out by GoCompare Mortgages earlier in the autumn showed that a fifth of renters are worried that changes to mortgage interest tax relief on buy-to-let properties will reduce the supply of rented properties in their area.
Commenting on the research, Matt Sanders from GoCompare Mortgages said: “April saw profound changes to the taxation of buy-to-let properties which will reduce landlords’ profits and our survey suggests that there is a real concern among tenants that to protect their profits, over time some landlords will increase rents while others may sell-up – reducing the stock of available private rented homes.”
Now I don’t think that landlords should be supported at the expense of first-time buyers, absolutely not. But neither should renters be forced to bear the burden of helping those first-time buyers through the medium of their landlords.
Now read: Will the Stamp Duty break hurt landlords?
Any action the government takes needs to consider more than home ownership, unless it’s going to help the millions who rent who may not get help from the Bank of Mum and Dad.
We’re targeting landlords to free up properties. Okay. We’re supporting would-be first-time buyers with targeted financial help. Great.
But where is the support for the people in the middle who are not buyers and not likely to become buyers without a substantial shift in the markets?
Because they need security and stability and affordability just as much as buyers do. We can’t just let them fall between the gaps because they’re hurt by one policy and not helped by any others.
What do you think? Should landlords pay up and put up, or simply give up? Have your say using the comments below.
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