A Government that prioritises owner occupiers at the expense of the PRS

The end of year forecasts for the buy-to-let market in 2024 made difficult reading, particularly when it came to purchase lending activity, which both UK Finance and IMLA said would be lower this year than last.

Personally, I believe those predictions are somewhat pessimistic view but I have sympathy with their outlook, especially when you consider the obstacles that are in place for landlords, and the clear direction of travel taken by numerous Governments over the last 15 or so years which have prioritised first-time buyers and owner-occupation at the expense of the private rental sector (PRS). 

A policy which you might well argue has merely exacerbated a large number of problems which continue to impact tenants, landlords, or indeed the aspirations of those who would like to buy, but who find a market low on supply, and high on demand. 

Before the Budget there were some mutterings that this Government was willing to turn a corner.

Jeremy Hunt is a landlord after all, but when the Budget was announced, it appeared instead of rowing back on those anti-landlord policies, it had double-downed on them. 

Take, for instance, the decision in the Budget to cut higher rate Capital Gains Tax (CGT) on the sale of residential properties, which it explicitly states is designed to move property out of the PRS and into the hands of first-time buyers. 

How this is deemed to be solving the problem of helping more first-time buyers into their own homes, or indeed tackling high rent levels for tenants, or ensuring there are enough properties for those who wish/have to rent or want to buy, is somewhat beyond me. 

Does the Government believe vast swathes of landlords have, up until now, been put off from selling their properties just because higher rate CGT was at 28%?

What would that saving generally be anyway now it has been dropped to 24%? A few thousands pounds? Have large numbers of landlords been waiting to sell until they got that CGT cut?

Of course not. The long-term investment horizon for most landlords makes this policy utterly irrelevant and while there will be the odd landlord who benefits financially from such a cut, they would probably have been selling up anyway, and I suspect in the vast majority of sales, it will not be first-time buyers moving into those properties, but instead that supply is much more likely to stay within the PRS.

What does this achieve overall? Very little. It certainly doesn’t boost supply in the PRS, and given that recent ONS data revealed UK private rents are at their highest on record, the demand/supply imbalance is still creating the environment for higher rents, which in turn make it more difficult for tenants to save for deposits, plus of course, they have to be able to access property to buy in the first place.

Instead of focusing on policies that boost supply for tenants and first-time buyers, the Government continues to adopt a ‘take from Peter, give to Paul’ approach, which ultimately undermines the ability of Peter to secure a PRS property at a decent rent, and Paul to move out of the PRS and into their first home.

Both Peter and Paul suffer because it is felt that you have to punish those landlords who are trying to provide property for Peter to move into, and Paul to move on from.

Of course, none of this is new really, it’s just that we might have thought we had reached the end for such policies, only for the Chancellor to find some more – abolishing Multiple Dwelling Stamp Duty relief and furnished holiday lets tax allowances being the other two. 

Indeed, for the latter, instead of seeking to understand why landlords have pivoted their properties into, for example, holiday lets in order to try and improve rents to cope with higher mortgage costs and overall property costs, there is an assumption that this is somehow been done out of spite in order to ostracise locals from properties in their area. 

Overall, until we have a Government which understands these markets are all-connected and they will all benefit from increased supply of housing, we’re going to have policies which try to engineer greater levels of supply for homeowners at the expense of homes for tenants.

And, as has been proved, that will only exacerbate the problem rather than fixing it. 

Bob Hunt is chief executive of Paradigm Mortgage Services