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Landlord tax breaks should be reinstated to stem flow of selling up, NRLA says

Mass exodus?  The phasing out of mortgage interest relief was a factor in many homeowners deciding to sell

Buy-to-let body calls for return of landlord tax breaks to stem tide of sales and ease rental supply crisis

  • Restoration of mortgage interest relief could ease rental supply crisis
  • This tax relief has been replaced by a less generous system
  • This is one of the factors that pushed the owners to sell

Removing a tax hike on private rental housing could help ease the rental supply crisis, according to the National Residential Landlords Association.

Full restoration of mortgage interest relief for the private rental sector could help ease the sector’s supply crisis, according to research by Capital Economics for the NRLA.

The mortgage interest exemption allowed landlords to deduct their mortgage interest from the income they received from rent when they filed their return.

But this was reduced between 2017 and 2021 and replaced by a much less generous system of tax credits.

Under the tax credit system, homeowners instead get a 20% tax break on mortgage interest payments.

Mass exodus?  The phasing out of mortgage interest relief was a factor in many homeowners deciding to sell

Mass exodus? The phasing out of mortgage interest relief was a factor in many homeowners deciding to sell

The search comes amid a supply crisis that continues to cause pain for tenants across the UK who are desperate for accommodation.

Changes to mortgage interest relief have been a factor in many homeowners deciding to sell their properties due to rising mortgage rates.

With the reinstatement of mortgage interest relief, research claims that 110,000 fewer properties would be lost to the private rental market.

If the Bank of England’s base interest rate were to peak at 5% and stay above 2.5% until the end of 2027, as many have predicted, up to 735,000 properties rented private homes could be lost across the UK compared to 2021, the study suggests.

Indeed, interest rate increases have led to higher mortgage rates, including for homeowners.

Ben Beadle, chief executive of the NRLA, said: “In 2015 the government said it wanted to ‘create a more level playing field between those who buy a house to let and those who buy a house to live in’. .

“In doing so, it increased the costs for responsible landlords and completely ignored the burden it would create for tenants.

“In the midst of an unprecedented cost of living crisis, the government must put economic reality ahead of political pride and reverse this travesty of reform.

“Homeowner tax hikes, exacerbated by rising interest rates, have deepened the supply crisis. And as this research demonstrates, the situation is unlikely to improve until it is reversed.

“A sweeping rejection of these damaging policies is needed to help stem the tide of lost rental properties, limit rent hikes and increase Treasury revenue.”

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