Rent to buy: should landlords get a tax break for selling rental homes to long-term tenants?

Long-term tenants could get a ‘chance to buy’ their home from their landlords under proposals put to the Treasury ahead of the autumn Budget.

Private landlords who sell buy-to-let properties to sitting tenants who have lived in their home for three years or more would not have to pay capital gains tax on the sale, which is currently charged at 28 per cent on second homes for upper rate taxpayers.

According to the paper published today by the right wing think tank Onward, the tax relief would then be split equally between landlord and tenant, giving renters thousands of pounds towards a deposit and landlords a substantial tax saving.

In London, the average tenant would receive £19,500 towards a deposit under the scheme, while nationwide the average gain per property would be £15,000 or £7,500 each for renter and landlord.

Onward said the £1.3bn-a-year policy should be paid for by reducing other tax relief for buy-to-let landlords.

Their research estimates that as many as 88,000 households would take up the relief each year, turning one million renters into homeowners over the course of five years.

THE SPIRALLING COSTS OF GETTING ON THE LADDER

Britain’s growing number of private renters were significantly more likely to vote Labour (54 per cent) than Conservative (31 per cent) at the last election, according to the policy, which aims to increase the Conservative party’s appeal to renting voters.

A separate report from the Institute for Fiscal Studies (IFS) found that levels of home ownership among 25 to 34 year olds had dropped from 55 per cent in 1997 to 35 per cent in 2017.

It blamed the decrease on property prices rising nine times faster than wages over the past 20 years, meaning that even with a 10 per cent deposit, only 61 per cent of young adults could afford to buy one of the cheapest properties in their area.

In London, only one in three adults could afford to buy the cheapest local home, given that most mortgage lenders will not lend more than 4.5 times a buyer’s salary.

The IFS suggested relaxing planning regulations to boost housing supply in areas such as London where young people want to buy homes to moderate both house prices and rents in these areas.

It said that recent policies that aimed to increase home ownership amongst young adults – including reducing stamp duty for young buyers – had risked increasing house prices.