The New Economics Foundation is working with the Our Homes coalition of grassroots organizations and campaigners to develop policies to fix England’s broken housing model. Tax reform is an important tool to achieve this goal. It can close loopholes, raise revenue to invest in more social housing, and shape behavior to achieve wider policy objectives, such as increasing the number of secure homes (social rent and owner-occupied housing).
The long-standing competitive advantage some landlords enjoyed over other homebuyers has eroded in recent months. Rising interest rates have squeezed rental profits for mortgage landlords, with some selling their properties. But this is not an exodus. Proposed regulatory changes, soaring interest rates, and recent tax reform have curbed speculation among smaller landlords with large mortgages, but not among larger, equity-rich landlords who have little interest in borrowing. Less dependent and now enjoying greater power in the market. The result is that investors with large equity holdings are squeezing out first-home buyers and social landlords who rely on expensive borrowing.
With some struggling landlords looking to sell their homes, this should be an opportunity for first-time buyers and social landlords to acquire these properties and convert them into more secure tenure. But now investors with large stakes are exerting additional leverage, meaning the opportunity is being squandered. Equity-rich landlords and overseas speculators are also more likely to leave homes vacant or convert their properties into holiday homes, which could reduce supply in the private rented sector (PRS) and drive up rents.
Tax reform – particularly around stamp duty – will help level the playing field by curbing the ability of stock-rich investors to buy more homes. Crucially, as an acquisition tax, increasing stamp duty on speculators does not encourage them to sell existing properties and therefore cannot be said to contribute to any putative property. Number“The exodus of landlords.” What it will do is tilt the power towards first home buyers and social landlords to buy these properties and convert these homes into more secure tenure. The reforms could also raise an additional £3.4 to £5.7 billion in 2024/25, depending on the amount of increases implemented and the extent to which deal numbers are affected. This could more than triple the size of government spending on social and affordable housing, enough to fund an additional 18,600 to 31,100 new social homes.
