Dear David,
Thank you for your email. While the restriction of mortgage interest tax relief has never been a priority for Shelter we do support the change that the Chancellor announced in the Summer Budget. This is for a number of reasons.
In the first place, this change will help to level the playing field between landlords who pay the higher rate of tax and first time buyers when they’re trying to buy a property. The tax relief currently makes borrowing cheaper for landlords than for owner occupiers, giving landlords a competitive advantage over prospective first time buyers. This is part of the reason that the share of new mortgages going to buy-to-let is at an all-time high.
Given the preference of the overwhelming majority to own a home rather than to rent, we think that this advantage is unfair.
While the underlying cause of high house prices is the current shortage of homes, tax relief on buy-to-let has exacerbated this by giving an incentive to investors to take on unsustainable amounts of debt. Phasing out the tax relief should help to remove this inflationary pressure from the housing market and calm the destabilising effect it is having on prices over the long term.
Finally, we support this change because we believe that there are higher priorities for government spending. At a time when the government is committed to eliminating the deficit, our campaigns have focussed on protecting housing benefit for low income renters and the affordable homes budget. Cuts to and restrictions on housing benefit are the single biggest threat to increasing homelessness in the immediate term. And cuts to the budget for genuinely affordable homes pose the biggest threat to finding a long term solution to homelessness in England.
In the era of austerity, these are bigger priorities for spending than on tax relief for higher rate landlords.
Irrespective of our in-principle support for the policy, we fully support work to mitigate any possible unintended consequences that the government’s decision may have. Given the five and a half years before these changes come fully into effect and the 18 months before they even start to be phased in, there is time for this to happen. We would encourage any landlord who believes that they might be affected by the tax changes to take advantage of the time they have to consider their options, which include sale with sitting tenants, and discuss them with their tenants.
Best wishes,
Campbell Robb
Chief Executive
