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Categories: government and politics | prs
Various organisations urged the government to focus on helping landlords in the Spring Budget 2023, but the result was underwhelming.
The 2023 Spring Budget delivered various changes to help the UK economy recover and tackle inflation. However, the government did not listen to the calls of Royal Institute of Chartered Surveyors (RICS), The British Property Federation (BPF), the National Residential Landlords Association (NRLA) and others, as they urged the government to help landlords and the private rental sector (PRS).
Support to help landlords has been growing with various entities stating that it is necessary to introduce changes into the private rental sector. These include a Conservative MP’s recommended tax reform and the NRLA and Propertymark via their responses to the Levelling Up Committee’s proposal to the government on private rented sector (PRS) reforms.
Ahead of the Budget announcement, voices from across the property industry called for changes from the government:
The Home Builders Federation
The HBF felt that development restrictions in the UK should be less restrictive. According to them, federation members face “an extremely challenging business environment, particularly with regards to the ongoing economic uncertainty, energy crisis and inflationary pressures and an increasingly anti-development planning system and policy regime”.
The Centre for Cities
The Centre for Cities Think tank’s report “The Housebuilding Crisis” revealed that there is a backlog of “missing homes” in the UK, and called on the government to build over 4 million homes in the coming decades.
On this point, it is important to note that the government recently scrapped its target of building 300,000 homes per year. So, the backlog of over 4 million unbuilt homes is likely to already be faltering.
The NRLA on tax
The NRLA called for the Treasury to look into the buy to let (BTL) sector as they claim that 30% of landlords are planning to exit the BTL market. They urged the government to review the following:
- Mortgage interest tax relief
- The 3% stamp duty levy
- Reduction of capital gains tax thresholds
Ben Beadle, Chief Executive of NRLA, remarked:
“From students queuing to view properties, through to benefit claimants who struggle to access homes they can afford, the impact of the supply crisis in the rental market is stark.
“The harsh truth is that the government’s efforts to discourage investment in the sector are working. But punitive taxation alongside record demand for rented housing is a disastrous combination that serves only to hurt renters – it is time to change tack.”
RICS on energy efficiency standards and support for landlords
RICS urged the government to provide certainty on new regulations for landlords, which also includes Decent Homes Standard and Minimum Energy Efficiency Standards.
They have been calling for fiscal and advisory support for landlords who may be asset rich, but cash poor, and adoption of the upcoming “RICS Service charge residential management code” with the aim to protect owners and tenants in leasehold and common-hold properties.
Lastly, RICS recommended re-evaluating current regulations and standards in the PRS, to ensure tenant rights are protected and landlords are supported.
Before the Spring Budget 2023, Sam Rees, Senior Public Affairs Office at RICS, said:
“Ahead of the UK budget on 15 March, RICS is emphasising the critical role housing has to the UK economy, and the need to boost supply through new builds and commercial property conversions where appropriate whilst conforming to the strictest standards.
“RICS supports efforts to improve the energy efficiency of homes and the continuation of the government’s Energy Price Guarantee. Further fiscal intervention for consumers and businesses is required to scale up the retrofitting of UK homes and we welcome initiatives such as ECO+ that go some way in delivering such needs.
“With rising rents and diminishing housing stock in the private rental sector, the government must do more to support landlords who are leaving the market due to increasing cost and regulation challenges.
“Landlords continue to raise concerns with RICS on the lack of clarity and financial support from government to meet expensive energy efficiency improvement targets which is further pressuring landlords into exiting the sector.
“RICS would also encourage the government to restore the Local Housing Allowance to the 30th percentile to support those private renters who are struggling with rising rents.”
The BPF on zero-rate VAT for energy efficiency upgrades
The BPF urged the government to apply zero-rate VAT on work to upgrade properties to achieve better energy efficiency standards.
They warned that, without giving property owners this help, the government might fail to meet the 2050 target of net-zero carbon.
Currently, landlords are under pressure as they may be required to upgrade their EPC ratings, which appears to already be affecting investment decisions, as well as generating concern around the costs involved. Under current proposals, all new tenancies are expected to meet EPC rating of C or higher from April 2025, and for existing tenancies by 2028.
The BPF state that the current targeted VAT relief scheme on energy-saving materials is ineffective, as the UK currently is struggling to retrofit its residential housing stock.
According to the latest report, 58% of the properties have an Energy Performance Certificate (EPC) of D or even lower, and less than 20% of owners are planning to improve their property’s EPC rating.
The BPF also suggested the government to take action to ensure business rates are not a barrier to environmental improvement works and that they should introduce improvement relief.
To encourage investment in commercial retrofit projects, the BPF has been campaigning for a capital allowance system reform to strengthen the support for carbon reduction and its long-term investment.
What’s more, they also proposed an alternative relief for capital expenditure, which would provide full tax relief in one year and use a repayable tax credit system.
Chief Executive of the British Property Federation, Melanie Leech, commented:
“Some 80 per cent of commercial and residential buildings that will exist in 2050, the deadline for reaching net zero, have already been built.
“The country’s homeowners and commercial property owners face a real challenge in reaching net zero targets and complying with incoming legislative changes. Failure to remove financial barriers to energy efficiency upgrades, is a failure to recognise the huge task the country faces in reaching net zero.
“The government needs to recognise the importance of incentivising energy upgrades across both the commercial and residential property sectors in next week’s Budget. The Chancellor has a clear opportunity to alleviate costs for households and encourage investment in measures that improve a property’s energy efficiency.”
Spring Budget aftermath
Many landlords and landlord groups remained cynical of financial support coming from the government, despite so many organisations campaigning for it. The messages being given focused on the negative impact measures against landlords are having on the tenants they were put in place to protect.
However, in his Budget announcement, whilst the Chancellor placed a focus on the struggling economy, the cost of living crisis and of course on housing, there was no mention of changes to give more support to landlords.
As anticipated, the Chancellor introduced an increase on the main rate of corporation tax paid by businesses on taxable profits over £250,000, from 19% to 25%, which is reported to net the Treasury £18bn per year.
However, it’s unlikely to affect landlords. The Chancellor himself said that the government expects only 10% of businesses across the UK to be affected by the corporation tax hike, and at the threshold set it is unlikely to impact most limited company buy to let landlords.
