It’s not often that a Conservative party think tank pushes for policy changes which will directly benefit landlords and property investors.
The last time we can think of is… never. At least not in the lifetime of this publication.
And yet here we are at the tail end of 2018, looking over a proposal which would not only set the housing market moving again, but also give property owners a windfall worth tens of thousands of pounds.
Most people are familiar with the current house price fiasco, whereby millenials with a five figure deposit can’t even reach the bottom rung of the housing ladder. Homes are expensive, scarce, and a sizeable proportion of them are in the private rental sector. It’s sad, but them’s the breaks.
The Onward think tank – named after Emmanuel Macron’s En Marche movement and explicitly aligned with the tories – has proposed 100% capital gains tax relief if a landlord sells to a tenant who has been living in the property for three or more years.
That’s a lot of money.
An ‘average’ property sold in 2008 for around £170,000. Today it would be worth about £214,000. That’s an increase of £44,000, and means you’d be liable for a capital gains tax in excess of £12,000 if you flogged the property today.
“But I don’t want to sell my property,” you whinge. Fair enough, but when you do decide to sell, it makes more sense to get £12,000 more for it.
Where this is heading, of course, is an attempt to push the current and future governments off course from their plans to make three year tenancies a mandatory requirement for rentals. After all, wouldn’t you be less likely to give your tenants the boot if you stood to make an additional £12,000 off them when you sell? It’s the equivalent of an additional 18 months rent (or more if you’ve had the property longer). It’s free money.
And it will put the brakes on landlord to landlord sales, meaning that properties which once off the ‘true’ residential market would stay off forever, will now be back on, allowing first-time buyers to buy the home they have lived in and (presumably) love. There would be fewer Section 21 notices issued to tenants when a property changes hands, because the property would be going to the tenant.
On paper it would look fantastic. Housing reform achieved at a stroke by using carrots rather than sticks. It’s hard to see any losers in this.
Oh wait. There’s the estimated cost to the treasury of £1.32 billion per year. Again, that’s a lot of money. It’s roughly the equivalent of running the NHS for three days. It’s about what it costs the country to have a nuclear deterrent fleet for three months. £1.32 billion is a measurable percentage of the UK’s GDP, and unless the government, or one of its many, many think tanks can come up with a way to replace it in the budget, its absence will be noted.
On the other hand, it’s a small amount to pay to prevent Generation Rent and all of their successors from becoming Generation Rent Forever.