Speaking at the National Landlord Investor Show Conservative MP Ian Duncan Smith has urged the government to incentivise landlords who let properties to social tenants.
He believes that private landlords provide a vital service by renting to tenants in receipt of local housing allowance or housing benefit. Encouraging them to stay in the market could be achieved with the reversal of the controversial changes to private landlords taxation in 2015, which has seen landlord profits shrink and driven many to leave the market altogether.
The 3% surcharge applied to the stamp duty payable on additional properties that weren’t the main home was in response, he suggests, to the amount of property being bought in London where the buyers had no intention of occupying it. As a result, all buy-to-let purchases were caught by the new rules. This was followed in 2016 by the phasing out of tax relief on buy to let mortgage interest, shrinking profit margins even further.
1.4 million tenants in receipt of local housing allowance rent privately
The Residential Landlords Association 2017 survey revealed that one-fifth of the poorest 10% of households are now renting privately, demonstrating the dependence of the social housing sector on private landlords.
However, these private landlords are struggling, particularly as the rent for social housing tenants tends to be lower than average. Add to that the problems with the rollout of Universal Credit and the resulting rent arrears accumulated by many tenants, and mortgage lender reluctance to finance landlords that rent to tenants receiving housing benefit, and it’s easy to see why some landlords are looking for a way out.
Is there a future for the social rented sector?
‘I personally think there have been some mistakes made,’ Duncan Smith told landlords at the event. ‘I really do think that we need to ensure we do keep the social rented sector running and with reasonable margins so that [landlords] stay in it, otherwise we are going to be pushed to find rental properties for people, and some of that pressure is already existing.’
He said: ‘This is one of the areas I have said we should come back to. Should we separate out, not completely, but just look at this area as a social need? And therefore it needs to be treated in that way? The returns on it are not great so you need to look, therefore, at what keeps people in the market.’
