From the FT readers' letters:
Private landlords (a majority of whom are individual investors) own 3.7m homes and provide homes for the increasing number of people who cannot afford a home of their own;(1) many of these landlords consider housing investment as a replacement for other forms of pension savings,(2) yet they pay tax on their Schedule A rental income and they pay CGT on profits from the sale of their properties.(3)
Politicians and their advisers need to understand clearly the consequences of introducing a wealth tax on owner-occupied homes (4) and those homes provided by private landlords; investors in housing have provided much of the housing capacity over the past 10 years,(5) yet additional taxes may drive them away from the sector, forcing many tenants (unable to buy their own home) to find homes in a rapidly declining market.(6)
Charles Fairhurst, London W1.
Nope, his statistics are correct but otherwise it's all lies from start to finish.
1) Clearly tenants can afford them, as the rent will always be slightly more than the landlord's costs, some of which would not be incurred with owner-occupation. A large part of the reason why tenants cannot afford to buy them is because by and large, BTL landlords have made net purchases equal to most new housing built in the last ten years, thus driving up the price (the tax and subsidy advantages of this kind of 'investment' goes straight into higher prices).
2) And it's the tenants' job to go out and work and give the already wealthy a handsome pension income? Quite how are tenants supposed to save up for their own pensions..?
3) True. But the landlord bears these taxes, not the tenant.
4) Yes, would lead to more efficient use of land and buildings; would enable tax cuts on the productive economy (primarily benefitting tenants); would dampen boom-bust cycle etc.
5) Wilful distortion - see (1). And those 'investors' haven't provided the most important and expensive element of housing: the land with planning permission. The land is just there and planning permission is an entirely political thing of little relevance in a truly free market.
6) OK, so net income will decline and thus the resale value will decline, although there's no reason to assume that the percentage yield (i.e. net income divided by selling/purchase price will decline), so our BTL landlords will not be able to improve their income by selling up and the effect will be far less marked than he claims. And if they do sell a few of those 3.7 million homes, I'm sure there are plenty of tenants who'll be only too happy to buy them for owner-occupation.
Isn't one of the big Home-Owner-Ist lies that there is a shortage of housing? Has the man managed some leap of Homey DoubleThink and persuaded himself that a tenant under threat of eviction would rather be homeless than buy himself a cheap house, and that all those houses sold for knock-down prices would stand empty? Who in his right mind is going to buy a house with a recurring tax bill and leave it standing empty? Simple observation of existing facts in the real world tells us that the number of vacant buildings goes down if the tax on them increases.
A grim document
16 hours ago
5 comments:
Would you mind clarifying and expanding point 3) I'm not quite sure how it computes.
BJ, when a landlord buys a house, he looks at post tax income and compares this with post-tax income he can get from other investments.
If the tax is "too high" then the price gets knocked down and it is the person from whom the current owner bought it who has paid all the landlord's tax in a lump sum discount.
So he can't squeal too loudly about income tax and CGT because he knew about them from the start and the price was adjusted accordingly.
Further, the landlord cannot pass these on to the tenant. The rent is pretty fixed and independent of landlord's actual or notional costs (as you know perfectly well yourself).
So for him to later whine that tenants would be adversely affected by LVT is nonsense, maybe landlords will he adversely affected, but their loss is the tenants' gain (they are now owner-occupiers with affordable mortgages).
I always thought I was a landlord, but no, I'm actually one of the "investors in housing".
Wonderful bit of special pleading BTW, but pointless, nonetheless. No-one is going to introduce any form of wealth or even property tax any time soon.
Bayard, thats only because people keep saying they won't. You are letting them off their commitment by even saying it. I hear all landlords say this pro or anti lvt. "for they who are given much, much is expected"!
The latent presumption from the start in the language used in the letter is that the landowner created or provided the land.
This fallacy is all we need to concentrate energy on. Focusing on the superficial logic is just showing lack of confidence in our faith in the principle. Nail em on the principle and hang on to it like a pit bull. They cave in very quickly. Simple and saves bags of time
ye of little faith.
B, sadly true.
RS: "The latent presumption from the start in the language used in the letter is that the landowner created or provided the land"
Yes, exactly, that was my point 5. More subtly, the physical land is not so important, what is important is the rental value thereof, which is entirely separate thereto. It's like wood and flames. The wood is just there, flames can come and go.
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