Buy-to-let is the 'elephant in the room' of the housing crisis

25 June 2018
Image

Low stock, poor planning and buy-to-let investing are the biggest issues facing the housing market, according to new research from think tank Onward.

Its report, written by Neil O’Brien MP, calls for councils to be given powers to build new villages, towns and cities instead of undertaking piecemeal construction around the periphery of existing settlements. The report also calls for more power for central government to build new ‘garden cities’ alongside better integration of transport and housing planning. 

Mr O’Brien’s report is also damning of the buy-to-let market, calling it the “elephant in the room”. He writes that “limited housing stock is too often used as a speculative or investment asset rather than a home”.

He continues: “Increasing the supply of new housing on its own will not be enough to reverse falling home ownership unless new homes go to first-time buyers instead of investors. We cannot continue to incentivise the growth of buy-to-let and the private rented sector in the way that we do now.”

The report calls for further changes to be made to the tax system to disincentivise buy-to-let in order to curtail demand for housing as a ‘speculative asset’. This includes ending the capital gains tax (CGT) exemption loophole for primary residences and further reforming mortgage interest relief for landlords. The report also recommends new powers for local councils to prevent overseas purchases of new homes.

In addition, the think tank recommends the creation of a ‘Homes for Younger People (HYP)’ initiative with rents 10% to 20% below market prices in order to “help get them off the treadmill of renting and onto the housing ladder”. The report recommends offering half a million ‘HYP Loans’ to help young people who can afford a mortgage but cannot afford to save for a deposit.

Mr O’Brien says: “In Britain, a generation are being denied the chances to get a home which older people took for granted. At the same time, we are building too much that is ugly, losing too many of the green spaces that people value the most, and stoking opposition to development. The solution to one problem is the solution to the other.”

Comments

In reply to by anonymous_stub (not verified)

lets look at what has fueled buy to let, low interest rates, poor returns on savings, and the rip off private pensions, all these idiots in government are going to achieve here is 1) push up rents, 2) increase people sleeping on the streets.

In reply to by anonymous_stub (not verified)

Make no mistake, there are two elephants in this room. Not only are buy-to-let landlords reducing affordable housing stock to young people trying to get on the housing ladder, but that stock has already been depleted by the second-home owners. No-one should have the right to own two properties. If you want a holiday home, then participate in timeshare, or what's wrong with using hotels and guest houses for that short stay, without owning a property which is laying idle and empty for most of the year? Not only are these homes depriving people of permanent homes, but they are wrecking communities where people are also being deprived of friendly neighbours. They force the prices of properties up beyond that which young people can pay for a roof over their heads, and they deprive shopkeepers of their livelihoods so their businesses have to close down for lack of trade when the second-home owner has gone back home to his first abode. Villages and small communities in my area become ghost towns when the summer is over, with 90% of their properties empty until the next holiday season.

In reply to by anonymous_stub (not verified)

what planet is this O'Brien on? the government have already put measures in to 'disincentivise buy-to-let' which will only drive rents up and will compound the problem because the so called 'first time buyer' will have even less money to save to get on the property ladder. these new houses he wants built will be expensive because developers will want to build where they can sell i.e. in the 'existing settlements'. 'HYP? All these hare brained political schemes are designed to feed developers and 'address' the first time buyer issue, there is no first time buyer issue! they need to save, but they can't can they, because if any of them get a good salary job, their student loan needs paying back. Garden cities-Hilarious!! Get a grip O' Brien!!! Note, I am not a landlord or owner of another property, just my home.

In reply to by anonymous_stub (not verified)

Yep b2l is the elephant in the room ... it’s not worth being a landlord -if you work - have a pension -or e=want to make money .. taxed to death. The supply rental will only reduce Yes I would get out if I dint have great tenants who don t want to leave .. there is no incentive fir b2l. It is for Idiots holiday let’s air bnb etc are the on,y sensible letting

In reply to by anonymous_stub (not verified)

we are good landlords of some 15 years and we are totally fed up with the hammering landlords are getting from the government,unfair changes to allowances and the bandwagon of "do gooders" who think they know best about tenants rights and extended lets.good tenants are valued by us and in return we look after them - a few rogue tenants or landlords spoil things but equally the more the government pressure private landlords and for sure if interest rates move upwards the "buy to let" market will be killed off. I believe tenants have suffered from Osborne's changes to tax allowances not just landlords.look at rent increases for UK.

In reply to by anonymous_stub (not verified)

There already has been a shift in the buy to let market since the last tax change. Prices on lower end housing stock has plateaued in my area - South Coast - as landlords are not committing to any further additions to their portfolios. As for ending the no CGT on primary residences, that is going to be extremely unpopular. It will start to take away the whole purpose of buying your own home particularly when inflation is so low.

In reply to by andrew townshend (not verified)

Not sure what you mean by rip off private pensions. You seem to be directing your criticism at a broad church of reasons. I have a private pension and it has done really well. Obviously I should have put more money into it but I have not been 'ripped off. I do agree however that low interest rates have made buy to let attractive. This government seem content to allow market forces alone to dictate what rent people pay. When i was younger i rented through a hoising association and the rent was registered with the 'Fair Rent Officer' this ensured it was affordable and any increases were strictly monitored. Maybe this is the solution.

In reply to by anonymous_stub (not verified)

Mr O'Brien is missing the point, imho the housing crisis was started by Mrs T and the right to buy. Everyone always had the right to buy on the open market. Social housing was there for those people that couldn't afford to buy, not for tenants to buy at vast discounts. The parents of a friend bought there house very cheaply, then as the value increased borrowed against the property for improvements, cars and holidays. When the mortgage rates went up, the house was repossessed and they needed social housing. They cannot be the only people that did this.

In reply to by anonymous_stub (not verified)

The government spent £400 billion of our money on quantitative easing to increase the value of their rich friends' assets. Why are they surprised that house prices went up? I am sure that they will be paid by the elite for their betrayal of the British people, just like Tony Blair was.

In reply to by anonymous_stub (not verified)

I call for the numerous in-house pubs in the houses of parliament/lords to only be open for 2 hours during the lunch breaks,and maybe after 7pm-its a place of government business not a country club . Also be charged "london prices" for their drinks.Sorry to digress.

In reply to by anonymous_stub (not verified)

So the main thrust of this "research" is that policies should be adopted that move us away from treating housing as an investment asset, whilst at the same time removing the CGT exemption; i.e. taxing it just like an investment asset!With such "logical" thinking as this is there any wonder the majority of the public increasingly believe politicians are the problem and not the solution?

In reply to by anonymous_stub (not verified)

Housing crisis caused by increased population in a small land; policy of selling off social housing at below market value and not replacing or increasing social housing stock as was supposed to happen; second homes in seaside resorts increasing prices yet leaving ghost towns in the winter; low interest rates for a decade leaving savers financing people's cheap mortgages; help for first time buyers and parents buying their offspring flats in university towns increasing demand and prices; large amounts of housing owned by the few, such as BTL landlords who can then increase rents to a point that renting something half decent is as out of reach to many as buying. Oh, and long-held gov't policy and culture that we should all strive to be homeowners.

In reply to by anonymous_stub (not verified)

Why the great call to disincentivise and tax buy-to-let landlords? If successive governments had built enough “council houses”, there would be no need for the private rental market to exist. As it is, private rentals are filled a much-needed slot in the market.Is it not putting the cart before the horse to penalise the landlords, when there is patently not enough council accommodation?

In reply to by anonymous_stub (not verified)

What is wrong in the UK is that all the BTL incentives are geared towards amateur Landlords just like Geoff the "incidental landlord"..As I asked several years ago in my response to a Government Enquiry if you wanted to rent a car would you rather rent it from a professional company like Avis or Joe down the pub couldn't sell his old one so decided to rent it out? If the rental market favoured professional companies who could build a blocks of apartments then rent them out, economies of scale would hopefully mean a better service for less money.Before comparing the UK with places like Germany you need to ask. Who owns the properties in Germany, and what rights the Tenants of those properties have.

In reply to by anonymous_stub (not verified)

"Buy-to-let is the 'elephant in the room' of the housing crisis"... mmm... one short heading, no explanations, no defence, (or offence) no solutions and no suggestions? For political correctness, best to keep blaming the older generation for holding on to the larger houses that only the same generation can afford to buy!

In reply to by anonymous_stub (not verified)

incentivise eh which planet is the truth hon twit from .. 3% stamp duty 40% tax on turnover impossible mortgage hurdles .. idiot

In reply to by anonymous_stub (not verified)

One 'elephant in the room' is the low pay of young professionals making them unable to save even a scant 5% deposit and pay a hefty mortgage in order to buy. The other 'elephant in the room' is the poor return on investments for retirement for people like myself, terrible deals done with the unions on work pensions and waiting an extra 6 years for my state pension. What can we do, suck it up and be poor? There's a business market for BTL and we are running businesses. The environment in which we operate has been created by successive governments and now we are being penalised for it.

In reply to by anonymous_stub (not verified)

We were incidental landlords for 5 years. Before the stamp duty penalty on "second" homes was thought of, we let our old house rather than selling it, so as to speed up our moving house. Because we had good tenants, it was let for longer than we planned. We might even have kept the property as a retirement income source but the politics of anger towards landlords and the legislation that pandered to it, caused us to sell up. So there is one less rental property available in our area. And one less good landlord. Out tenants themselves were a young couple who had let our their home another area so as to move to our area to develop their careers.This is not an especially expensive housing area.The reason why there is a problem in the rental and buying markets is the huge decline in social housing and the public sector rental opportunities. All this hatred towards landlords is a complete distraction from that and all it will achieve is to make fewer options for first time buyers, and relocaters alike. And might actually drive UP house prices.As for abolishing CGT relief for primary residences, that would have a hugely effect on the economy. People would not move house, there would be less labour market flexibility and nobody would downsize.This is cloud cuckoo land politics.

In reply to by anonymous_stub (not verified)

Mr O'Brien is missing the point, housing crisis is about ensuring everybody has somewhere to live , not necessarily owning their own home. In other European countries, it is normal and acceptable to rent. Tax private landlords further and yes they will withdraw from the market, in the prosperous south east no doubt these ex private landlord houses will be snapped up by people keen to buy their own home. However what you will see in the north is rows of empty houses that private landlords will not buy and private individuals will not be able to afford to buy - only have to look at recent history. I suspect the motive behind this proposal is simple - another Tory tax raising measure - and no doubt to help Mr O'Brien climb that greasy pole of the political elite.!

In reply to by Jill Murray (not verified)

True but some councils will not allow many ‘2nd homes ‘ to be occupied other than as holiday homes- north Devon is but one .. and what about 2nd homes let as businesses .. it’s not as simple as ban 2nd homes everywhere — in Devon. Cornwall Lake District . it’s banned but are house prices lower . nope

In reply to by Jill Murray (not verified)

Buy to let houses do contain tenants who support local businesses and if locals in holiday resorts didn't sell their houses for better prices to second home owners there wouldn't be that problem. The government gave huge subsidies to right to buy purchasers while others worked hard to pay off mortgages as they paid full price for their homes. Now the government is again helping one part of society , to the detriment of others, this time younger buyers with saving schemes not available to older savers to help them buy homes, while people who own their homes , lose them if they need to go into care while the government pays for free nursery care that it didn't previously when we had enough money to fund care homes for the elderly.

In reply to by Jill Murray (not verified)

Hi Jill, correct me if I'm wrong but I thought a scheme was brought in that you had to born or lived within a certain radius to buy houses in areas like yours? But of course that may have come too late for those that already own second homes in these areas.

In reply to by Chris Murphy (not verified)

Chris Murphy wrote "Garden cities-Hilarious!!"Why not ? The idea worked fine in the 1960s with the creation of places like Milton Keynes.It always amazes me that you can drive around the M25 and there are loads of green fields on either side. Go a bit further afield and Britain still has plenty of room.

Add new comment