Labour slams Sunak on stamp duty

Labour want PRS and second homes excluded from stamp duty holiday. August brings change to Universal Credit. Landlords can claim under Green Homes Grant;
Labour party logo

The Labour party has written to Housing Minister, Robert Jenrick, requesting that landlords and second home purchases be excluded from the stamp duty holiday announced on 8th July.

Speaking on the subject, Thangam Debbonaire, shadow housing secretary, has said that:

“It is unacceptable that the Chancellor tried to sneak out this huge bung to second home owners and landlords while millions of people are desperate for support. He should be targeting support to those who need it, not helping people invest in buy-to-let properties and holiday homes.

“An unnecessary subsidy for second home-owners will only worsen the housing crisis by reducing the supply of homes overall.

“We need a credible plan from Tory Ministers to build the homes our country needs and get people on to the housing ladder. We didn’t see that this week.”

Invest in councils instead

Labour is instead asking that that funds given away in the tax break, be diverted to councils.

The party highlights that “Over a million people are on council waiting lists whilst the number of new social homes has fallen by 80%” and shares their view that investing in affordable housing would be better use of the funds.

Labour states that 34% of properties bought in 2019/20 fell into the investment property or second property category. As a result, they say that by including these sorts of purchases within the stamp duty holiday, the cost will be £1.3 billion.

The Local Government Association has said that by the end of 2020, there will be a funding gap of £1.2 billion for local councils.

Labour believes the Conservatives can fill this shortfall, by reversing the stamp duty holiday on second properties.

The Institute for Fiscal Studies has warned that, rather than helping first time buyers (as is the intention of the move); the stamp duty holiday could push up house prices and therefore work against this group.

The stamp duty saving on buy to let property

Investment platform and stockbroker services company, AJ Bell, has analysed both the overall saving offered and which geographical areas will benefit most.

Saving to landlords on buy to let property purchases:

Property value

Old stamp duty

New stamp duty

Stamp duty saving

£150,000

£5,000

£4,500

£500

£250,000

£10,000

£7,500

£2,500

£300,000

£14,000

£9,000

£5,000

£400,000

£22,000

£12,000

£10,000

£500,000

£30,000

£15,000

£15,000

Source: AJ Bell

Saving by region

The variation in average house prices across England (the saving also applies to property in Northern Ireland, but statistics for this are not given) mean that the cut in stamp duty favours different parts of the country, differently:

Region

Average property price

Stamp duty saving

London

£485,794

£14,289

South East

£323,353

£6,167

East of England

£291,254

£4,562

South West

£263,360

£3,168

West Midlands

£195,971

£1,419

East Midlands

£194,664

£1,393

North West

£166,202

£824

Yorkshire and the Humber

£159,208

£684

North East

£126,945

£38

Source: AJ Bell

The stamp duty holiday proposed by Rishi Sunak was voted on in the House of Commons on Monday 13th July.

MoneyDWP announces Universal Credit changes

From August, direct rent payments will be issued to landlords on the same day Universal Credit benefits are paid to their tenants. This is expected to achieve a huge time saving for affected landlords.

Where Universal Credit tenants struggle to pay their rent, they can have the housing element of their benefit paid direct to their landlord. This is called an ‘alternative payment arrangement’ or ‘direct rent payment’.

At the moment, these direct rent payments are paid in 4-week cycles. Clearly though, a calendar month doesn’t always directly align to 4 weeks, because different months have different numbers of days within it.

This causes issues for housing associations and local councils who have had to align the direct rent payments with monthly universal credit payments.

It also costs landlords a significant amount of time in chasing rent payments, when other benefits have been paid.

The Universal Credit director general, Neil Couling, has announced that there will now be a ‘payment alignment feature’. This functionality will automatically switch direct rent payments to a monthly cycle, thus aligning the payments with the universal credit schedule.

Testing of the process has been carried out and, according to the DWP, results have been largely positive. Their findings were that landlords found the process quick and easy and very few claimants needed additional help.

The announcement was made to landlords, through the Universal Credit landlord portal. All landlords with “trusted partner” status who are using the platform will benefit from the change.

Guidance will be issued to landlords who have not been part of the January trial, which they will receive two weeks before their live date.

Welfare delivery minister, Will Quince, described rolling out the new functionality, amidst the added pressures on universal credit, as the result of the coronavirus pandemic:

“Despite the outbreak of COVID-19 and the substantial changes we have introduced as a result, I am delighted we are now in a position to provide the benefits of the payment alignment feature to all social landlords on the Universal Credit landlord portal.

“We have processed an unprecedented 2.5 million claims for Universal Credit since 16 March and the wider introduction of this process will help reduce time spent on administration by landlords and I would like to thank those who were part of the successful trial for their support.”

Speaking on behalf of the National Housing Federation, policy leader Sue Ramsden welcomed the news, highlighting that:

“tenants and landlords will be able to understand immediately if the account is in credit or debt”

It is expected that the change will positively affect 771 landlords.

Energy performance certificatePRS included in Green Homes Grant

Within the Chancellor’s Summer Statement announcement, on 8th July 2020, were his plans to provide up to £5,000 per household for energy efficiency improvements to properties.

It was initially thought that property within the private rental sector (PRS) would fall outside the scope of the scheme, but the National Residential Landlord Association has since confirmed that landlord properties will qualify.

When will the Green Homes Grant launch?

The Green Homes Grant comprises a fund of £2 billion and is eligible to properties in England (Scotland, Wales and Northern Ireland properties will not be eligible). It will launch in September 2020 to homeowners and landlords.

To apply from recommended energy efficiency measures, applicants will submit their details online. Applicants will be given the details of accredited local suppliers.

When the work quoted for is approved, a voucher will be issued to the applicant.

What is the potential saving?

The Treasury has said that the Green Homes Grant will cover at least two-thirds of cost of approved works.

Chief executive of ARLA Propertymark welcomed the news:

“Since the withdrawal of LESA [Landlords Energy Saving Allowance], we’ve been calling for a simple grant scheme to help private homeowners and landlords make their properties more energy efficient.

“The announcement is a big step forward to ensure that they can take the necessary steps to do this and ultimately create a greener property sector in the UK.”

The overarching objective of the Green Homes Grant is to save energy and lower bills. Things like double-glazing and cavity and wall insulation are amongst the works that fall within the scheme.

Criticism of the scheme

News of the Green Homes Grant is not without its critics.

It has been pointed out that its previous incarnation, the 2013-2015 Green Deal, only received 14,000 applications, so had little impact.

Furthermore, the enhancements that were carried out – and will be offered within the latest scheme - can actually create further problems.

According to Dr Chris Roberts, assistant lecturer at Birmingham City University’s School of the Built Environment, double-glazing in older properties can create damp and condensation issues, for example.

Mr Roberts’ view is that gas boilers are ‘a far more pressing environmental concern’.

If the government were to tackle use of gas boilers, the alternative for energy efficiency, ground source heat pumps, are a far costlier solution. The Centre for Sustainable Energy suggests that a ground source heat pump can cost £10,000-£18,000.

Capping most households to a £5,000 grant (the poorest applicants are subject to a £10,000 cap) and assuming the maximum payment were approved, would mean that installing such a system under the grant would barely pay 50% of the cost, at best.

A further criticism of the Green Homes Grant is that, in comparison to our continental cousins, France and Germany, the UK government’s investment is far smaller.

France has allocated a £13.5 billion fund to similar energy saving initiatives and Germany £36 billion.

You might argue that each country is considerably bigger than the UK, however, Germany is only 1.5 times greater in square kilometres than the UK and France is 2.3 times bigger. The grant funding by contrast, even proportionate to the land mass is not even close.

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