Tax rises are slowing housing investment

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Tax Rises:

An analysis released today by the Office for Budget Responsibility (OBR) confirms the impact of tax increases on choking off investment in rented housing.

In its Economic and Fiscal Outlook published today, the OBR warns of “subdued growth in residential investment.” The assessment comes following a string of tax hikes on private rented housing, including a stamp duty levy on the purchase of new homes to rent and restriction of mortgage interest relief to the basic rate of income tax.

Alan Ward, Chair of the Residential Landlords Association said:

“Today’s assessment by the OBR demonstrates the folly of taxing the supply of new homes to rent.

“It is more important than ever that we recognise the dynamic role the rental market can play in swiftly responding to the country’s ever changing housing needs. The Government should come forward with a package of pro-growth tax and planning policies to support private landlords who want to invest in the new housing the country needs if renters are to be able to find the accommodation they want.

“The build to rent sector is not delivering at the rate required and in the past private landlords have delivered three out of five of all new homes.”

The Residential Landlords Association: The home for landlords

The RLA represents the interests of landlords in the private rented sector across England and Wales.

The Office of Budget Responsibility has published its latest Economic and Fiscal Outlook. It can be accessed at: http://cdn.obr.uk/EFO-MaRch_2018.pdf   Page 67 notes:

“Real residential investment rose by 7.8 per cent in 2017, up from 7.6 per cent in 2016. In line with our forecasts for house prices and property transactions, we expect relatively subdued growth in residential investment over the forecast period. Housebuilding is expected to slow in the near term, reflecting subdued turnover in the housing market and modestly higher interest rates. Housebuilding is then expected to rise as housing market turnover picks up. Housing improvements are also expected to slow in the near term thanks to recent weakness in real wages, before picking up as real earnings growth picks up. Over the medium term, residential investment is expected to grow broadly in line with real GDP.”

The Chancellor has delivered his Spring Statement, a copy of which can be read at: https://www.gov.uk/government/speeches/spring-statement-2018-philip-hammonds-speech  In it he declared: “We are the champions of small businesses and the entrepreneur.”

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