Dear George,
Re: Your proposed extra 3% SDLT on Second Homes and Buy-to-Let property purchases from April 2016.
THE PROBLEM
1. This measure will deter would-be Buy-to-Let (BTL) investor landlords from buying properties to let.
2. Through natural wastage the number of available private rented sector (PRS) properties will decline below existing levels, every year from now on.
3. Reduced supply versus ever-increasing demand will push up asking rents to even more unreasonable levels – something there is already a public outcry about.
4. Because a lot fewer BTL properties will be purchased from 1st April 2016, less SDLT will be received by HM Treasury, despite the higher rate being charged.
THE SOLUTION
5. The time to tax private landlords is when they SELL their properties and have made a capital gain.
6. The correct policy change therefore would be to INCREASE CAPITAL GAINS TAX by 5% on BUY-TO-LET and SECOND HOMES.
7. No landlord will mind (as much) paying CGT at an increased rate of 33% in future, instead of 28% at present.
8. Paying a ‘price’ to exit a market when wanting to release cash, is a lesser pill to swallow than paying an extra price on entry.
9. As an added benefit, landlords will be more likely to hold on to their existing BTL properties, rather than selling them. Result – more PRS properties remain in the market available to tenants.
10. At a time of ever-increasing demand for rental properties it would be madness to bring in measures which will discourage private landlords and reduce the future supply.
11. Broader issues of people living longer, inadequate pension returns and how the very elderly will provide for themselves towards the end of their lives, are also very relevant.
Why am I sending this to you? As an independent letting agent (of 33 years’ standing), I launched the original (and only) national Buy-to-Let scheme in 1996, initially introducing the concept of Buy-to-Let mortgages to UK lenders and then developing and marketing the scheme to the general public over the subsequent 4 years – while serving on ARLA’s National Council. As a result, and having advised many BTL landlords since then, I feel I have an insight into the PRS and know what encourages people to invest in it – or not. I can therefore clearly see just how damaging and counter-productive the proposed ‘SDLT + 3%’ policy would be.
PLEASE THINK AGAIN GEORGE, before you wreck a vitally-important ‘cottage industry’ which has successfully met a huge proportion of UK housing need over the last 20 years – at no cost to HMG or the tax-payer. By all means increase taxation of landlords – and I think you should – but not in the destructive way you are planning!!
Your sincerely,
Andrew F. Reeves
