It's great that Labour is looking at cutting tax breaks for bad private sector landlords, but they should be targeting them all.
According to the government’s English Housing Survey 30% of England’s 4.4 million private rented sector homes failed to meet the decent homes standard. This is a scientific survey of over ten thousand homes that takes place each year.
We think Labour’s proposal to cut tax breaks for landlords whose properties are in poor condition is well-intentioned but raises a challenge. You can’t just implement this with a national register of landlords (which we support), you would also need to inspect the portfolio of every landlord claiming the tax break.
We think there are about 1,500 professional Environmental Health Officers working for councils in housing. If they all dropped all their enforcement work they would have to do 13 inspections a day to cover the whole PRS in a year.
We do support more enforcement of housing conditions and we also call for higher standards to be maintained so that there’s a level regulatory playing field between social sector and private sector housing. But the tax isn’t the way to do it. Landlords simply shouldn’t be allowed to earn money from forcing people to live in squalid conditions.
So Labour’s proposed register of landlords should have far tougher teeth than simply the removal of tax breaks.
But on tax, Labour has missed a major point. Why should any landlords get these tax breaks at all? By vaguely defining themselves as either businesses or individuals, landlords get to evade paying tax on mortgage interest and capital gains, they pay neither council tax nor business rates, many get a 10% “wear & tear” allowance, and HMRC estimates they’re still illegally avoiding another half a billion pounds on top of that. Plus they are receiving over £9 billion a year in housing benefit, often housing the most vulnerable people in poorest conditions.
We’re calling for a clawback of these landlord tax scams, which with housing benefit we think adds up to £27.7 billion a year. With a 22% tax on rent income you could raise £9 billion, and we think that should be hypothecated for building social housing.
And rents wouldn’t go up – because landlords are already getting the market rent out of tenants. Supply and demand is how rents are currently set, not landlord costs. And if some landlords left the market it wouldn’t matter, because they would sell those homes, meaning house prices would go down, due to the increase in sellers (see - supply and demand again).
More than that, building an extra 100,000 social homes each year with the money raised by the tax would also bring rents down, because you would reduce the number of tenants in the PRS (reducing demand). You’d also bring down the housing benefit bill because it’s much cheaper in social housing than it is at market rents.
The Green Party is proposing 500,000 council houses over the parliament paid for from cutting landlord tax breaks. It’s great that Labour now is also looking at this unjustified cash that just helps keep house prices high. But please support our call for a Robin Hood Tax for Renters as a real and effective solution to the housing crisis. https://www.change.org/p/uk-government-a-robin-hood-tax-for-renters