How will changes to landlords’ taxation affect the housing market?

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As of this month, alterations to the tax relief on commercial mortgage payments mean that most landlords will be pay more tax. Alan Ward, Chairman of the Residential Landlords Association, writing in the Telegraph in April 2017, has examined what effects the tax changes will have on the housing market.

One of the arguments the government has used to support the introduction of these tax changes is that it means more houses available for first-time buyers. The government said that the tax rises would put off landlords purchasing more property, and therefore first-time buyers will have a larger choice of houses at their disposal.

Ward, however, says that there is no evidence to back this up. The London School of Economics looked at houses up for sale in 2016 and concluded:

“Only a minority of sales to landlords involved bids from both types of buyer.”

The government’s policy is to encourage more Brits to buy a home of their own. Landlords faced with higher costs raise rents and tenants will take longer to save up for a deposit to purchase a new house. This appears contrary to the government’s home ownership policies.

Another effect that the government predicted was that rented property will be owned by fewer but larger landlords. Large landlords tend to concentrate their portfolios in large cities, and are not interested in rural areas and small towns. If small landlords do sell up because of increased costs, Ward says there could be a shortage of rented accommodation outside cities.

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