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Has the Chancellor driven small landlords out of the market?

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The Chancellor’s buy-to-let tax changes could drive smaller landlords from the market and “make the housing crisis worse” for renters, say experts.

Today, George Osborne revealed stamp duty rates for landlords would be 3 percentage points higher than residential purchasers from April. The details are set to be consulted on by the Government.

Giving his Autumn Statement today, he said: “Frankly, people buying a home to let should not be squeezing out families who cannot afford a home to buy.”

This is not the first time the Chancellor has attempted to wrestle back stock for the residential market. In the summer Budget, he announced the tapering down of tax relief for buy-to-let borrowers to the basic rate of tax from April 2017.

Experts warn the combination of both measures could hit tenants and result in landlords with little disposable cash or a small number of properties leaving the sector.

Centre for Economics and Business Research head of macroeconomics Scott Corfe says: “[The combination of both measures] will lead to a reduction in the supply of rental accommodation in the UK, as buy-to-let becomes a more unattractive investment.

“The sale of housing association properties through Right-to-Buy will also contract rental supply. For those who cannot or are not willing to buy a home, the Chancellor may actually be making the housing crisis worse.”

Precise Mortgages managing director Alan Cleary says: “Some people’s knee jerk reaction that this is the end of the buy-to-let market is well wide of the mark. But this is likely to result in a move towards professional landlords.”

The buy-to-let sector has experienced a strong recovery in recent years. Lending peaked at £45.7bn in 2007 but fell to just £8.6bn two years later. Since then it has grown 218 per cent to £27.4bn in 2014 and is expected to pass £30bn this year.

This has led to concerns among policymakers. As well as introducing new stamp duty rates and cutting tax relief, Osborne has also confirmed the Financial Policy Committee will be given the power to control the sector, although it has not yet been decided what these powers will be.

The Buy to Let Business managing director Ying Tan suggests buy-to-let lending could fall next year as a result of the clampdown by policymakers.

He says: “Put together, the recent measures aimed at buy-to-let make it a very challenging market and if the Government doesn’t want the sector to exist – or exist as big as it is now – then they will keep introducing measures. Will buy-to-let lending fall next year? It’s possible.

Landlords writing on online landlord community Property Tribes say the changes will “send a tsunami” through the buy-to-let sector.

The portal’s co-founder, Vanessa Warwick, says: “This is another blow for landlords, following the Summer Budget 2015 tax changes. There is a clear agenda by the Government to stifle small landlords investing in the private rented sector.

“Landlords are supported by many other businesses such as lettings agents, mortgage brokers, builders, and suppliers of landlord-related products and services, and these too will be affected as the PRS will stagnate or even start to shrink.

“Ultimately though, it will be tenants who bear the brunt as choice of rental property decreases and rents rise as a result. The ripples will be felt throughout the property sector and the Conservatives have ensured that they have lost the landlord vote.”

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  • Chris Hulme 26th November 2015 at 6:00 pm

    I hope the Chancellor is prepared for the state to become a super-landlord once again as the availability of rental properties declines.
    This is now a step too far. There really needs to be a serious legal challenge mounted against the Government by landlords and their associations across the sector. There is no other industry that has been targeted in this inequitable fashion. It has to stop before jobs and houses are lost.