Bringing back full mortgage interest tax relief for landlords may help ease the housing crisis faced by renters, says the National Residential Landlords Association.
This move would “help stem the tide of lost rental properties, limit rent rises, and boost Treasury revenue,” says the lobby group.
Since 2021, mortgage interest tax relief for landlords has been limited to the basic rate of income tax.
If the Bank of England’s base interest rate was to peak at 5% and remain above 2.5% until the end of 2027, up to 13%, or 735,000, of privately rented properties could be lost across the UK compared to 2021, says research by research firm Capital Economics commissioned by the BTL body.
This would lead to a loss of £1bn of Income and corporation tax revenue a year for the Treasury.
But if full mortgage interest tax relief was reinstated the research body estimates that 110,000 fewer properties would be lost from the private rental market, benefiting the Treasury by £400m from boosted income and corporation tax receipts.
The NLRA says: “This research comes amid a supply crisis which continues to cause misery for renters across the UK desperately seeking a place to live.
“The Bank of England, the government and the cross-party Housing Select Committee are among those to have warned that demand across the sector is outstripping supply.”
The survey also says that scrapping the mortgage interest reforms could reduce future rental inflation in the sector and reduce financial pressure on landlords planning maintenance and improvements.
The NRLA is calling on the government to undertake a full review to examine the impact of recent tax rises on the sector, which should cover the effect mortgage interest tax relief changes have had on the supply of private rented homes and the cost of accessing rented housing.
National Residential Landlords Association chief executive Ben Beadle says: “In 2015, the government said it wanted to ‘create a level the playing field between those buying a home to let and those buying a home to live in’.
“In doing so it hiked costs for responsible landlords and totally ignored the burden it was to create for renters.
“In the middle of an unprecedented cost-of-living crisis, the government needs to put economic reality before political pride and reverse this travesty of a reform.
“Tax hikes on landlords, exacerbated by rising interest rates, have deepened the supply crisis. And as this research demonstrates the situation is unlikely to improve until and unless it is reversed.
“A radical rejection of these damaging policies is necessary to help stem the tide of lost rental properties, limit rent rises, and boost Treasury revenue.”