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Former Tory Party leader and Conservative MP Ian Duncan Smith has said that mistakes were made on landlord tax relief changes.
Speaking at the National Landlord Investor Show in London, the Conservative MP said private landlords who rent to tenants receiving local housing allowance or housing benefit provide a ‘vital’ service and must be encouraged to stay in the market.
The MP feels that this could be achieved by reversing controversial changes to the tax relief private landlords could claim introduced in 2015 under George Osborne, which have bitten into landlords’ profits and prompted thousands to abandon buy to let altogether.
Mr Duncan Smith said: ‘This goes back to 2015 when I think the previous Chancellor became fixated on the idea that, particularly in central London, too much property was being bought up by people who had no intention of occupying it.’
The chancellor introduced a three per cent surcharge applied to the stamp duty payable on any additional properties that weren’t a main home, therefore affecting all buy to let purchases.
This was followed the next year by the tapered removal of tax relief on buy to let mortgage interest, hitting landlords’ profits even harder.
Duncan Smith felt that landlords renting to social tenants could have been excluded. He said: ‘I personally think there have been some mistakes made. I really do think that we need to ensure we do keep the social rented sector running and with reasonable margins so that [landlords] stay in it, otherwise we are going to be pushed to find rental properties for people, and some of that pressure is already existing.’
Due to Universal Credit, swathes of social tenants have fallen severely behind on their rent and, with profits already under pressure for private landlords as a result of lower tax relief, many have become increasingly reluctant to let to social tenants on benefits.
When asked whether landlords in this position should be allowed to retain beneficial tax relief on their buy-to-let mortgage interest, Duncan Smith said: ‘I do think that’s the area we need to look at.
‘What’s changed over the past 15 to 20 years has been the balance between wholly owned social housing and privately rented social housing. We have come to rely more and more on the private sector to provide that housing.’
Duncan Smith said Government should now revisit whether to reverse the changes to tax relief for private landlords renting to social tenants.
He said: ‘This is one of the areas I have said we should come back to. Should we separate out, not completely, but just look at this area as a social need?
‘And therefore it needs to be treated in that way? The returns on it are not great so you need to look, therefore, at what keeps people in the market.’