With the election happening tomorrow (how are we in the middle of December?) we’ve put together a short summary of what each party will be bringing to the table for Landlords and Investors and to go through what this could mean going forward through 2020.
Is it all bad?
No – there has been the release of the manifestos in which each party has pledged to make it easier for tenants to buy their homes, based on how long they have lived there. This isn’t anything new – The Conservatives introduced a scheme under Margaret Thatcher in the 80’s with “right to buy” for their social housing. This doesn’t mean that tenants will automatically choose to buy their property. There are still the rising costs of property values and although said to be discounted, if a tenant has lived in a property for several years, the savvy investor would have achieved a good return on investment in that time. The enforced sale of the property, while not something ideal – could present the landlord with the opportunity to “cash out” and seek another property opportunity elsewhere.
There have been several law changes under the Conservative government that have hit Landlords particularly hard:
- In 2016 the 3% stamp duty surcharge was introduced, and then the removal of mortgage interest tax relief for Landlords.
- The Prudential Regulation Authority changed their rules to make buy-to-let landlords and investors go through more challenging affordability testing.
- By April 2020 landlords won’t be able to deduct any mortgage expenses from their taxable rental income.
- They will however receive a 20% tax “credit” based on 20% of their mortgage interest payments.
- This means that landlords will only be able to get refunds in the lower 20% bracket rather than the top rate of tax bracket.
- This does, however, force some landlords with large portfolios into a higher tax bracket as their income that pays the mortgage needs to be declared on a tax return.
It’s been a challenging time for Landlords; however, it still remains a strong market. There are likely to be less loopholes, more rights for tenants and portfolios may become more refined rather than broad – but positive change is what the electorate want and while understanding the issues facing landlords in maintaining large portfolios, they will all seek to pander to the majority to get elected.
Pledges from the Parties
There is a pledge to build somewhere in the region of 250,000 – 300,000 new homes a year (averaged) by 2026 from all parties which varies between council, social and private housing. Labour and the Green Party are more focused on council houses and The Conservative and Liberal Democrats more on private housing. The Brexit Party haven’t discussed Landlords or the rental sector.
A summary of pledges:
- 300,000 homes a year by 2026
- New ways to support home ownership (Help-to-Buy completes in 2023)
- Abolition of “no fault” evictions
- Deposits become “lifetime” and follow tenants when they move
- Barring the sale of new leasehold homes and restricting ground rents (into a low “token” rent)
- 150,000 council homes per year
- Expansion of tenants’ rights – open ended tenancies, government funded “renters unions” and the removal of the law that requires landlords to check tenant’s immigration status.
- Introduction of rent controls
- Power to councils to “buy-back” homes from Private Landlords
- 300,000 homes per year by 2024, 100,000 of these to be social homes.
- Increase in council tax by up to 500% on second homes
- Rent to own policy – tenants owning their property after 30 years
- Mandatory landlord licensing
- Increase of minimum efficiency standards for rented properties
- Every home to be insulated
- 100,000 new council homes per year
- Plans to restore housing support for 18 – 21-year-old's
- Empty properties in rural areas to be put into use by owners to rent or buy
- Simplifying planning consent for brownfield sites
Still worth investing?
Naturally we’re on the side of yes, we can see that there are challenges ahead, regardless of the party in power. The Conservatives have continually hit the rental sector and it has thrived despite this. The new homes being built won’t influence the existing ones; they’ll still exist. Each party has recognized that the huge increase in the rental sector is largely down to the difficulty affording a new home in todays market. However, there are still the huge advantages to tenants when renting a property. The flexibility it offers, the likelihood that they can afford a better home in a more temporary circumstance rather than committing to a 25 – 35-year mortgage etc.
Perhaps most important of all, and something we can celebrate as landlords of properties ourselves, is the better conditions for tenants to become mandatory. We pride ourselves as being responsible landlords, providing high quality properties for our tenants, managed for landlords or within our own portfolio. Landlords and investors can still make a good living from property investment, it just may have to change differently. Change is always good, it shakes up the market, allows for niches to be carved and ultimately given how large the rental sector is, how much investment it has within – no government will seek to hit it too hard, lest they lose a huge part of the economy.
Ready to invest?
If you’re considering investment in property – then speak to us at the Heaton Group. We’ve a wealth of experience helping investors make sound decisions and with some huge projects coming up in 2020, the time has never been better to speak to our team. Please get in touch at: email@example.com