Killer Arguments Against LVT, Not (239)

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.