London Mayor helps out private buy to let landlords?
London Mayor Sadiq Khan has revealed a policy to use housing cash to purchase existing homes from buy to let landlords rather than use those funds to build new social homes.
With some landlords looking to sell, first time buyers hoping to gain a home look like being out competed by taxpayer money.
The move acts as a boost to private landlords, and ensures prices stay up punishing those looking to buy.
GLA Deputy Mayor for Housing and Residential Development Tom Copley tweeted today:
In recent years boroughs have been doing similar including in Greenwich. I’d previously covered council reports which showed that buying existing homes was the worst value option to enable a greater number of social housing.
Greenwich Council have been spending an average of £394,550 per home purchased in recent years, while the average cost to build a new home was £223,000:
Buying existing homes of course also fails to increase overall housing numbers than building new achieves.
In effect it’s a policy that helps landlords, harms first time buyers looking to buy as landlords seek to sell. They often cannot compete with public authorities and the policy results in no overall increase in housing numbers in the capital.
The argument for it is that existing homes can be bought quickly, which may have been given a pass a few years ago when first seen. But then you see the same the next year, then the next year, and then a decade later shouldn’t a pipeline of public housing be ongoing so all funds can go towards new social housing at far better value for money?
Landlords do well though, though the same cannot be said for younger buyers, private renters or council tenants as it’s the worst value option for providing public homes.
Both main political parties are full of landlords.
Looking after number 1 and keeping prices at elevated levels is more important than the number of council homes built.
Landlords possibly losing dough when selling? Can’t have that! Politicians have your back.
Imagine trying to portray bailing them out as helping those in need of council homes.
Would be poor form from Tories, but Labour!!
Interesting that Labour never got rid of right to buy (Blair has about 30 homes let’s not forget) in power then the Tories put the rockets back on after 2010.
Landlords bought up loads of homes and even get supported now once they’ve made massive capital gains.
Rotten from all of them. It’s obvious we need a program of new council homes with public financial support. Not Khan splashing the cash helping landlords make a mint.
Unless the buy to let (BTL) seller is particularly desperate, I don’t see much mileage in this scheme at all.
Capital Gains Tax (CGT) on a BTL property is 18 per cent if you are basic rate taxpayer or 28 per cent if you are a higher tax rate payer. However, a London property value gain is very likely to push anyone from the basic to the higher rate during a tax year, so you could easily end up paying CGT at the 28 per cent rate.
With this tax take always at the forefront of any BTL property selling decision, many landlords would rather take a hit on periods low/zero occupancy than cash in their investment. This eye-watering rate of tax for BTL sales is, in effect, seizing up the movement of a vast pool of properties whose owners/landlords would consider putting on the market if the tax rate was more accommodating (excuse the pun).
Of course, Mayor Khan isn’t responsible for the tax rates set by government. Consequently, given all the fanfare surrounding his latest scheme, it really amounts to another empty gesture from the mayor’s hyperactive PR machine. What a surprise.
Though many landlords do not register as being a landlords and do not pay tax. Wasn’t it 50 per cent in Newham when investigated?
So whether the GLA actually buy from a landlord – registered or not – is another matter. That bit seems a bit PR and they’ll buy any home including those unofficially buy to lets.
Ultimately it’ll benefit landlords and homeowners more widely as it keeps prices at a certain level through state intervention (again).
To be honest price rises through government intervention far exceed capital gains tax. Landlords have done very well the past few years and continue to do so.