NRLA suggests scrapping surcharge
- Published: Tuesday 09 February, 2021
- By: Commercial Trust
The National Residential Landlords Association (NRLA) has this week called on the chancellor to scrap the stamp duty surcharge on properties that add to the net supply of housing.
The surcharge, introduced in April 2016, ensures that buyers of any additional residential properties, other than the one they reside in, have to pay a 3% surcharge on the standard stamp duty rate.
The NRLA have made this change one of their key requests in their annual wish list, published ahead of next month’s budget. The organisation believes that a change in policy would help stimulate the private rental market.
They argue that by removing the stamp duty surcharge investors would be incentivised to re-enter the buy to let market. These new investments would help to meet the rising demand for rented properties in the UK and increase the overall transaction levels in the market.
Chief executive of the NRLA, Ben Beadle stated that due to the varied types of properties that investors purchase, supporting this area of the market would add to the net supply of housing.
Beadle specified that this increase would be achieved in a variety of ways, including:
- An increase in investment in new build homes
- Dividing large properties into smaller more affordable units
- Changing the use of a property from commercial to residential
- Bringing one of England’s nearly 650,000 empty houses back into use
Mr Beadle said:
“To have a tax on developing new housing is completely nonsensical at a time when more is needed. Supporting growth in the private rental market, alongside all other housing types, would provide a significant boost to the economy in the midst of the Covid-19 pandemic.”
Lack of housing availability pushes rents up
A study carried out by the Royal Institution of Chartered Surveyors has found that in suburbs, towns and villages the availability of housing is lower than normal for this time of year, whilst demand is higher than forecast.
This combination of high demand and limited supply of rental accommodation has seen the average price of rents outside of London rise. Rightmove have reported that this is the first time rents have increased since 2011 and has caused the UK average to reach £972 a month.
This reported rise can be attributed to a lack of supply of privately rented accommodation, giving prospective tenants no alternative but to bid against each other, forcing rents upwards.
Changes taxes to encourage long term lettings
The NRLA’s wish list also included a request to ensure the taxation system is changed to encourage the provision of long term rental property over short term holiday lets.
From April this year, the final stage of reducing the interest rates on mortgages for landlords to the basic rate of income tax will be completed.
However, this measure does not apply to furnished holiday lets. Resultantly, many properties have been removed from the long term rental market as landlords seek to take advantage of the tax benefits.
Mr Beadle commented:
“To be taxing long term homes to rent less favourably than holiday lets is simply bizarre. It completely undermines efforts by the Government to encourage the provision of long term, secure housing.
“It is time for the government to realise that its tax policies have created a shortage of rented housing. This can only mean higher rents and reduced choice for renters. This is not going to do much for the levelling up agenda.”
Landlords and tenants alike will wait with intrigue at the outcome of next month’s budget. Both will be hoping that the government announces changes aimed at stimulating an increase in the supply of privately rented accommodation.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.