Incentivising landlords in the private rental sector

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Housing Proposals:

A new report published by the University of Cambridge Centre for Housing & Planning, in partnership with the Joseph Rowntree Foundation (JRF), recognises the reluctance of many landlords to let their properties to low income tenants.

Given the apparent lack of support from government for small-scale private rented sector (PRS) landlords in this area, this report has produced three proposals which it claims could incentivise private landlords to let to social sector tenants, those claiming benefits.

Many benefit claiming tenants – singles and families – are having great difficulty securing rental accommodation in the private rented sector, and also in the social sector, given the decline of social sector housing.

The report claims that these proposals if implemented would improve accessibility, affordability, quality and security of housing for people in poverty in the PRS.

The proposals follow an international policy review of housing reform, and the contributing parties have identified key measures for further development in England:

(Proposal 1)

“The introduction of a Rental Incentive Allowance, enabling landlords to offset a proportion of their rental income against tax if they let their property to households in receipt of Local Housing Allowance. According to the report, this option would enable more people in poverty and with low incomes to access a larger range of more affordable private sector rented accommodation.”

(Proposal 2)

“Boosting incentives to improve the quality of property by allowing specified improvements to properties to be tax deductible against income tax, rather than Capital Gains Tax. This proposal could also incentivize landlords to take further action in improving the quality of accommodation on offer to low-income households, while also making improvements on measures such as energy efficiency, reducing fuel bills and other costs that would improve affordability.”

(Proposal 3)

“Improving access to housing by enabling local authorities to issue vouchers to priority households, guaranteeing the payment of rent. This measure could incentivise landlords to accept tenants viewed as a higher risk, making it easier for them to access accommodation.”

Cost Effective Measures?

The three proposals have been costed at: Proposal 1, £354 million a year; Proposal 2, £36 million in its first year, rising gradually to £86 million per year after nine years, and Proposal 3, £170 million per year.

By focusing on the use of taxation as a means of changing incentives for landlords in the PRS, the report claims the costs associated with the three proposals could be offset by HM Treasury’s recent tax increases implemented on private landlords.

The Government has anticipated an £808 million annual increase in tax revenues from landlords by 2021–22 through restricting mortgage finance interest relief to the basic rate of income tax.

The current Government is already in principle considering ways to incentivise landlords to offer longer tenancies.

Read the report here

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