Property taxes aimed at taking the heat out of the buy to let market by punishing landlords financially will only hurt tenants in their pockets, argues a former Bank of England policymaker.
David Miles says politicians want to look like they side with first time buyers by penalising landlords with extra tax, but the economics professor at Imperil College London predicts the tactic will backfire.
“One response, and it has been perhaps the most significant housing policy response in recent years, is to point one’s finger at the rental sector and say, well it is kind of their fault,” said Miles.
“My own view is that this is profoundly wrongheaded.”
He explained that the combination of adding 3% to stamp duty rates for landlords buying homes to rent coupled with phasing tax relief on finance interest down for higher rate taxpayers is unlikely to help other homebuyers who feel they are in competition with investors.
“I think these measures were introduced in order to try to help make housing more affordable for people who want to buy them, I think they are almost certainly wrongheaded,” said Miles.
“I suspect that they will have a negative impact on the ability of young people to become homeowners, because those people are in the rented sector already.
“Making rental property more expensive, as is likely if you reduce the attractiveness to suppliers of rented property, if a side effect of that is to make rents even higher, it is hard to see that as helping the people who you are trying to help become homeowners.”
Miles also made some forecasts about house prices.
“It is more likely that house prices will continue along the kind of trajectory we have seen in the past 50 years if there are no improvements in travel times. I think we will simply need to be within a certain physical distance of where the jobs are, which are already relatively densely populated areas,” he said.