The real reasons Labour won't kill buy-to-let
02-10-2015
On Tuesday, Ed Miliband unveiled proposals which would see three-year tenancies introduced Photo: Dave Thompson/PA
For all its crowd-pleasing talk, Labour will not – and cannot – seriously hurt the swelling ranks of buy-to-let investors, says Richard Dyson
By Richard Dyson
Of all the populist ideas floated by Labour ahead of the election, suggestions of a clampdown on buy-to-let – usually uttered in the same breath as wanting to help renters buy their own homes – are among the less realistic.
Not only are anti-landlord measures unlikely to work, but I doubt senior Labour MPs are very serious about imposing them. It’s crowd-pleasing talk.
On Tuesday, Ed Miliband unveiled proposals which would see three-year tenancies introduced. During these longer tenancies rent increases would be capped. Lettings agency fees applying to tenants would also be abolished (as is already the case in Scotland).
Rollover for soundBy Labour’s own calculations, renters’ savings from both measures would be modest: an average £600 each over five years.
The proposals confirmed my suspicion that when it comes to contemplating real, practical change in the private rented sector, Labour is either unwilling to act dramatically, or realises its hands are tied – or both.
Labour is unwilling to act because while the problem of unaffordable homes is acute there is now a swelling army of private landlords cutting across all parties. Latest HMRC figures show there are 1.63 million private landlords. That’s double the number of people who have an account with a stockbroker.
On top of that, many Labour MPs are landlords themselves. Research into MPs’ property interests in 2012 found that more than one in 10 Labour MPs owned a buy-to-let – a far higher proportion than in the wider public. Those factors act as one sort of check on any more aggressive measures.
But there are also practical reasons which would make it difficult for Labour (or other parties) to get tough on buy-to-let.
One is tax. There is a mistaken impression that private landlords don’t pay tax: an impression which some Labour MPs might be happy to engender, but which they probably know isn’t true. When Diane Abbott, an outspoken London Labour MP, last month tweeted a story reporting “landlords make £177bn gains from rising house prices”, her followers quickly replied with demands to “tax them”.
In reality, such gains are or will be taxed. And much of that tax will be at the higher, 28pc rate.
The fact is that between capital gains tax and inheritance tax it is now exceedingly difficult for second-property owners to legitimately avoid tax on gains.
And introducing more targeted taxes on buy-to-let would be practically difficult for legislators. Landlords come in many forms and are often more or less indistinguishable from other businesses. Thus taking away from landlords the tax relief on mortgage interest, for instance, a perk applying to all businesses, is tricky.
There is also a grassroots problem: local authorities’ dependence on private landlords to house tenants. In the absence of any rapid, mass building of social housing, which no party is seriously proposing, councils would be in desperate straits if buy-to-let investors closed their doors. The following advert placed this week by Labour-controlled Lambeth council, in inner south London, sums up the crisis: “Lambeth offers landlords generous incentive payments, a choice of fully vetted tenants, no fees …”
Clobbering landlords? Hardly.
– richard.dyson@telegraph.co.uk