ROOF Blog

Thousands of first-time buyers will be priced out of the housing market if the Treasury presses ahead with plans to offer new tax breaks to buy-to-let investors, campaigners warn today. The Treasury published a consultation paper in February which included plans to boost the supply of private rented housing. One key proposal was for professional investors to pay stamp duty separately on each home, even when they buy a large portfolio of properties, reducing their total bill. PricedOut, which campaigns on behalf of first-time buyers who are not able to enter the property market, says the proposal is grossly unfair to first-time buyers and would make their struggle to buy a house even more difficult. William Griffith, spokesman for PricedOut, said: ‘The large tax breaks that buy to let currently enjoys mean that they can always outbid first-time buyers. It is astonishing that the government is seeking to further entrench this disparity in the housing market.’

Private sector landlords are urging support from MPs to ‘save the future of renting’ to students and young professionals. Nurses, teachers and a generation of young workers could be hit by a government plan to prohibit areas of shared housing for groups of unrelated tenants. The legislation comes into force on 6 April when new powers will allow planning legislation to be used to control the renting of shared properties to people who are not families or related tenants. Alan Ward, chairman of the Residential Landlords Association, said: The government’s change to planning Use Classes Orders is bad not only for landlords but for the whole private rented sector, not to mention the local economies that have traditionally grown around existing areas of shared housing’.

Ministers are to crack down on excessive housing benefit payments in a series of reforms designed to curb the increasing £17 billion annual rental bill. Yvette Cooper, the work and pensions secretary, plans to cap the highest rates paid to private landlords — as much as £1,800 a week — to stop families on benefit living in palatial homes at the taxpayers’ expense. The reforms are expected to save hundreds of millions of pounds a year, but could result in hundreds of families being evicted from expensive accommodation with six months’ notice. The housing benefit bill, which covers rents in the private and social sector, has jumped from £11 billion in 1998 to £17.4 billion in 2008-09 and goes to 4.5 million claimants. The Treasury has forecast that this will rise to £20 billion by 2011 because of the recession, rising private rents and a critical shortage of social housing. The average rent in social housing is only £72 a week against £108 in the private sector.

Opinion is divided over whether buying or renting is the better housing policy.

Centre for Social Justice Executive director Philippa Stroud argues that property ownership is still one of the best defences against poverty.

Royal Society for the Arts chief executive Matthew Taylor counters that home ownership has increased social inequality in terms of the life chances and assets of people who own their own homes, arguing instead that we should foster a massive expansion in the private rental sector and improve the quality of the houses on offer.

Charities are urging the government to do more to help tenants, claiming 1.3 million low income households are struggling with their finances.

Shelter and the Money Advice Trust said 90 per cent of households earning under £20,000 (£25,000 in London) are in financial trouble, compared to 56 per cent in 2006.

They want the government to address affordability in the private rented sector and offer advice and support. Nearly 50 per cent of those in trouble had not received advice in the last year.

According to the survey carried out by the two charities, four out of 10 people on low incomes said their debts were impacting on their health – rising to 50 per cent among households with children.

It also found 60 per cent of households in receipt of housing benefits or local housing allowance received less than the cost of their rent.

Shelter director of policy and campaigns, Kay Boycott, said many tenants at the lower end of the private rented sector faced a ‘daily battle’ to ‘keep their heads above water’.

‘The government must recognise the significant role the private rented sector is playing in bearing the brunt of this recession by increasing funding for advice and support services, and setting out a long-term vision for the sector,’ she said.

Struggling buy-to-let landlords are eating humble pie when it comes to finding tenants.

Checks and references traditionally carried out on tenants to assess their reliability in paying up are now being reversed as renters seek assurances the owner of their new home is legitimate and not on the verge of being repossessed.

David Underwood, a lettings consultant at Darwoods in St Albans, Herts, has noticed a ‘marked shift’ in emphasis:

‘Tenants have been far more interested in landlords’ backgrounds and are asking more questions about where their deposit is being held,’ he says.

It would seem that tenants’ concerns are well founded. When the Council of Mortgage Lenders (CML) started compiling buy-to-let data in the second half of 2005, only 200 investment properties were in mortgage arrears of three months or more.

By the first half of this year, this had soared to 5,400. Repossessions of investment homes also climbed, from 400 to 2,800, during the same period.