Top professor urges government to abandon tax changes
Friday 17 February 2017
Tax changes aimed at landlords have been blasted by a leading professor of financial economics who is calling for them to be abandoned.
Professor David Miles’ analysis of the impact of changes to mortgage interest relief and stamp duty land tax on the finances of landlords was published in November.
The Imperial College professor’s conclusion is stark: “It is hard to see any rationale for the tax changes announced in 2015.
“Evidence suggests those changes are beginning to have a dampening effect on the supply of private rented property. They should be abandoned.”
The tax changes are 'likely to have significant and negative effects on the supply of rental properties' he says and argues they 'represent a further penalty against private provision of rented properties by potential suppliers who cannot (or chose not to) invest via a corporate entity.'
His calculations suggest that unless rents rise significantly the supply of private rented property from private landlords will fall.
Prof Miles said: "Aspiring first-time buyers are hardly helped by squeezing the supply of rental property and driving rents up... (as) a large proportion rent.
“There is no evidence that private landlords with a small number of properties are bad landlords.
“Nor is there any reason to think that investing in property to rent is an inappropriate thing for people to do with part of their saving.
“It is strange to believe that having households channel more of their savings into US government bonds or into equity issued by German companies is to be preferred to their investing in providing rented accommodation in the UK.”
More than two thirds (67 per cent) of landlords reported that the changes to mortgage interest relief will reduce profitability, with the average reduction calculated at 34 per cent, research by the Residential Landlords Association (RLA) revealed.
David Smith, policy director for the RLA, said: “Professor Miles’ assessment proves that current tax policy will be counterproductive in making rents affordable and increasing supply to meet the growing demand.
“It is time for the Government to think again.”
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