The Government’s decision to reduce mortgage interest relief for landlords could, in conjunction with other welfare changes, actually make housing problems in the UK even worse.
Many people have the perception that landlords are often fat-cats who have huge portfolios and it is understandable that the Government would want to do something to ensure there are greater controls over such people. In reality however there are over 1 million private landlords in the UK, the vast majority of which are average people with just one or two rental properties.
For the average landlord the cuts in mortgage interest relief will not be dramatic but for those smart enough to have lots of properties they will also be smart enough to have lots of tax avoidance measures which will protect them from the impact.
The UK is desperately in need of providing greater housing and accommodation and the private landlord sector is fundamental to that. The big risk is that these new Government initiatives will put off potential landlords at a time when there is a desperate need for more accommodation in the UK It is often these ordinary or ‘accidental’ landlords, who provide cost-efficient housing to many young people and those on lower wages, who will be hit hardest.
The Budget also announced several cuts to welfare and housing benefits which will potentially hurt many ordinary landlords who provide housing for tenants on Local Housing Allowances (LHA). Indeed many private landlords work entirely in this sector in order to help housing problems across the UK and whilst some efficiencies are encouraged, landlords will ultimately find it hard.
The changes to social housing are likely to reduce the appetite for private landlords to rent to social tenants even further, reducing overall social housing stock, potentially putting more people on the streets. The Government will have to look carefully at tackling this and ensuring other measures are introduced to prevent this happening.
Ironically the fact that they have increased the amount of money householders can now claim for renting out a room in their own property to £7,500 means the Government recognises the housing shortage problem. Accommodation for those on lower wages and particularly young people who are unable to get on the housing ladder is significantly supported by the private landlord sector and today’s changes are in serious danger of making the housing shortage even worse.
Author of Property Magic
Founder of property investors network