Last week David Miles, a former policymaker for the Bank of England, went on record as being critical of the government's tax rises that target landlords. Being phased in from this year and in complete operation by 2020, mortgage interest is no longer deductible when calculating income.
He also criticised the stamp duty changes that mean those who purchase additional homes end up with a larger tax bill. The reason for introducing these changes was stated by the government at the time to be to adjust the balance of new home purchases in favour of first-time buyers. Whilst there has been a reduction in buy-to-let purchases and some first-time buyers stepping up to take the opportunities on the market, those that are tenants are potentially the unintended casualties of these policies.
The difficulty is that if the costs to the landlord of the tax changes require rent increases for the investment to remain afloat, without an oversupply of rental accommodation, tenants are vulnerable to rising rent. Considering that many would-be first-time buyers are living in rental accommodation at present, rising rents would impact their ability to purchase a home.
A strategy that would help more first-time buyers onto the property ladder would be to remove them from stamp duty eligibility; with house prices still rising, finding the deposit is difficult enough, without also adding a tax bill on top.
Whilst Help to Buy in theory should have a significant impact, enabling more first-time buyers to get into homes, reports show that those who really need the help, with average incomes or less, are not really getting a look in. The question we should be asking is, does a household earning more than one and a half times the national median income fit the criteria of needing government help?
Poorly targeted policies have unintended consequences, as we can see from tenants forking out for passed on costs, and Help to Buy failing to include lower income households. We'd encourage the government to pay a little more attention in these areas.