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Home / General / Clause 24 and the end of the private landlord

  • Jason McClean
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CLAUSE 24 of the 2015 Finance Bill is creeping closer to implementation in April 2017. I strongly believe this will destroy the private landlord and increase the UK’s housing crisis enormously. It will lead to the homeless living on the streets and the increase in theft, squatting and violence that brings with it.

And don’t expect the police to help, their numbers are being reduced under Conservative cuts as well. They cannot cope and even if they could, the justice and prison systems cannot cope either, there’s no room for custodial sentences. Although the homeless may prefer to have a roof over their heads, even if it is jail.

I’ve read about the Coventry Building society increasing income cover for the mortgages to 140% from 125% as a result of Clause 24. This follows Barclays and others moving to 145%. That means it is harder than ever to get a buy to let mortgage. It effectively stops ordinary people or investors getting into the buy to let market. That means demand for purchasing buy to let property is going to drop and supply of homes will reduce.

Maybe the Conservatives wanted that so their big corporate buddies could buy up stock cheaply and then rent on. But there are not enough big corporate landlords out there with appetite (supplying rental property through all regulations and at an affordable rate is not easy), the fact is supply is dropping. Lower house prices may happen for a period of time, but who can afford to buy these houses with new mortgage regulations and hefty deposits needed? The only spectre of relief is interest rates may reduce, making monthly payments lower.

It’s not the selling of existing stock I see as a boon or problem. It’s the fact there will be little demand for new housing stock from landlords. That will wipe 10% of demand overnight. The construction industry will not be happy either, expect job losses in the thousands.

And as for hitting new house building targets, that is laughable now. They say they want to build more but then hammer buyers with additional taxes. Supply is dropping and will continue to do so, never mind making amends and hitting the 200,000 new builds needed a year for 5-years just to get back to evens.

So with less supply, who are the most vulnerable tenants going to turn to? Their local Councils who must provide housing. The same Councils ordered to sell stock and cannot afford to buy. So their stock is reducing and they cannot house the existing waiting lists, never mind the amount that will add to the lists. Instead, they place people in B&B and hotel accommodation as temporary emergency measures that cost multiples of monthly rent charges. So the Councils are going into more debt. Ultimately they will have to charge that back to households, so increase in taxes again, because central Conservative Government will not provide a penny, indeed they are slashing spending.

It’s a perfect storm create by George Osborne and Clause 24 really could destroy the private landlord with its unfair tax system. It could also make hundreds of thousands of tenants homeless. It will end up costing you more in Council tax. Let’s pray that the judicial review against the unfairness of Clause 24 will succeed and at least then the private landlord can help to contribute to the housing solution by remaining active and providing homes for tenants. Without the private landlord, the housing crisis in the UK will only get worse.

Jason McClean

www.thepropertyinsurer.co.uk

 

 

 

 

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