Housing Minister on UK landlords and fixing the housing crisis

Gavin Barwell

In February the government published their 2017 Housing White Paper which announced a ‘change of tone’ for the Conservatives, away from a focus purely on home ownership towards an acknowledgement that renting is a positive choice for many people.

The aims of the whitepaper are four-fold:

  1. Get the right homes built in the right places
  2. Speed up house building
  3. Diversify the market
  4. Implement interim housing solutions immediately

The thrust of the paper was to increase the volume of homes being built, in order to achieve more affordable property prices, but the acknowledgement of the role of renting within housing policy clearly piqued our interest.

Much of what was discussed in the paper referred to institutional rental housing, but what we wanted to know – given the array of punitive costs recently laid at the door of private landlords – was the attitude of the government towards the private rental sector (PRS), given the vital role we believe it plays.

Private landlords the scapegoat for government failing on housing

Withdrawal of mortgage interest relief, an additional 3% on stamp duty and changes to the wear and tear allowance have and will hit landlords hard. It seems the governments tack is to make UK landlords the scapegoat for years of their own failing to build necessary volumes of homes for the population.

We attend regional forum with Gavin Barwell, Housing Minister

After the release of the white paper, Housing Minister Gavin Barwell announced plans to attend a series of regional events where he would field questions on the “Fixing our broken housing market” paper. We took the opportunity to attend the Cambridge event, to put a couple of key questions across.

The attitude of the government towards UK landlords

We wanted to put our point of view in defence of private landlords to the Housing Minister and find out what he had to say in answer to the cash drain he is placing upon them.

Matthew Bone, Commercial Trust, asked Gavin Barwell:

You want to provide more homes, you acknowledge the ability to rent is vital and you encourage institutionalised renting [in the housing white paper]. What is your message to decent private landlords who have been providing a backbone of support to UK housing for decades?

and,

Why are you punishing them financially, given the only outcome will be increased cost to tenants in rent and thus delay prospective first time buyers getting a first foothold on the housing ladder?

Gavin Barwell, Housing Minister, had this to say:

My message to private landlords would be very much that they make a vital contribution to our housing market.

The reason for the change that the previous chancellor made, is quite simple … the Bank of England basically warned the then Chancellor that there was a real concern about a bubble caused by the buy to let market…
I think if you were the Chancellor of the Exchequer at that point…it’s entirely understandable that the government felt the need to respond to that change.

At the moment there is a disagreement about the level of effect that these changes are going to have. The government’s view was that about one in five landlords will be affected and they don’t expect it to have a significant effect on the market. That view has been backed up by something called the Office for Budget Responsibility, who independently review the things that the treasury says during budget times, but I know when we’ve had the meetings [with them], that many landlords feel differently.

One of the things I would say to you, is that the change [is] being introduced over a 4-year period [and] is being phased in. That will give us the opportunity to actually see what effect that policy will have at that time.

To go back to my first point, landlords play an absolutely vital role in our housing market, and I wouldn’t want the people you work with to feel that they were under attack or that their contribution wasn’t valid.

What do Barwell’s comments mean for UK landlords?

Our chief executive, Andrew Turner, reviewed the comments of the Housing Minister and gave his own views on what this means for landlords.

Andrew Turner CEO

I find the comments of the Minister quite incredible. If the belief of the government was that the changes in taxation would have minimal impact on landlords, why did they bother doing it? The overarching objective is to making housing more affordable, but it is transparently obvious to those of us working in the PRS that any financial burden placed upon landlords is inevitably passed on in increased rents to those people the government is seeking to help – the tenants.

I do agree with Mr Barwell’s assertion that landlords play an absolutely vital role in our housing market, but how can he expect that landlords would not feel under attack and under-valued?

Owning property to let is commonly an investment run as a business, and is in many cases an undertaking brought about by the desire to prop up pension provision and to earn a living. Just the same as any other business. Yet the government seems to want to propagate the notion that landlords are the reason that individuals with lower earnings can’t afford to buy property. This simply isn’t the case. The many, many years of both Labour and Conservative governments failing to build the homes this country needs in the face of rising demand for homes is a clear sign that this is the root cause.

What can landlords do to protect their business?

The Spring Budget is now on the horizon for the UK, and more may be announced which will affect the position of landlords; the NLA recently warned landlords to avoid incorporation until after the Budget, for fear that limited companies may be the next target for the government.

We asked Andrew Turner what he recommends landlord should do in the short term:

My key hope is, as the Minister has intimated when he spoke at the Cambridge event, that the government closely monitors the impact of the taxation changes and opts to reverse their actions, I fear however that this is unlikely.

The best action available to landlords is to seek professional advice on all aspects of their buy to let business. Talk to a tax professional regarding the changes and adjust investment strategy if and as required.

When you have a clear picture of what it is you need to achieve, discuss the financial opportunities available with your buy-to-let mortgage advisor at Commercial Trust. We are helping landlords overcome complex challenges on a daily basis and will always take a professional approach to finding the most appropriate mortgage solution for our clients.

In addition, I issue updates via email to our clients and newsletter subscribers, to keep our contacts abreast of changes in the industry as they happen, keeping up to date on the issues will allow you to seek the right help at the right time.

This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.

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