From Rent to Own How to restore home ownership by turning private tenants into owners - Centre for Policy Studies
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From Rent to Own
How to restore home ownership by
turning private tenants into owners
By Alex MortonAbout the CPS The Centre for Policy Studies is the home of the next generation of conservative thinking. Its mission is to develop policies that widen enterprise, ownership and opportunity, with a particular focus on its core priorities of housing, tax, business and welfare. Founded in 1974 by Sir Keith Joseph and Margaret Thatcher, it is primarily responsible for developing a host of successful policies, including the raising of the personal allowance, the Enterprise Allowance, the ISA, transferable pensions, synthetic phonics, free ports and the bulk of the Thatcher reform agenda. About the Author Alex Morton is Head of Policy at the Centre for Policy Studies. He was previously a Director at Field Consulting, but before that was responsible for housing and planning in the No 10 Policy Unit under David Cameron, including working on key policies in the 2015 manifesto. He was previously Head of Housing at Policy Exchange. cps.org.uk From Rent to Own
Contents Executive Summary 1. Why We Need to Turn Renters into Owners 8 2. Help to Own – The Policy 14 3. Help to Own – The Numbers 21 4. Help for Tenants, Help for Landlords 34 5. Conclusion 47 Appendix 48 cps.org.uk From Rent to Own
Executive Summary
The housing crisis is one mortgage eligibility in the wake of the
financial crisis, and the boom in asset
of the great public policy prices (and in particular property prices),
challenges of our age – to means many renters have higher incomes
the point where the Prime than those buying, but are locked out of the
market as they cannot afford a deposit.
Minister has called it her
‘personal mission’ to reverse Theresa May and David Cameron’s
the fall in home ownership, Governments have attempted to redress
which is condemning the balance, for example via increased
charges on buy-to-let landlords in terms of
‘Generation Rent’ to a less mortgage interest and stamp duty. Some
stable, less happy and less are now calling for landlords to be punished
prosperous future. further, describing them as a new breed of
rentiers. But it is not only unfair to attack
To tackle this problem, Britain certainly people who have made perfectly rational
needs to build more homes – but the investment decisions, but misguided.
problem is not just about supply, but For all the talk of ‘fat cat landlords’, most
distribution. Britain is often portrayed as a see only a moderate return on their
country of high home ownership. In fact, investment – two-thirds have a yield of
across the EU28, we have the fourth lowest 5% or less, in return for an uncertain and
rate. In recent decades, owner-occupation fluctuating income that can be put at risk
rates have plummeted – especially among by unreasonable tenants.
the young and those on average incomes,
falling from two-thirds for the average Back in the 1980s, Margaret Thatcher’s
earner aged 25-34 in 1995-6 to just a Government – inspired by the work of the
quarter today. In short, we do not just need Centre for Policy Studies and others –
to build more houses, but create more delivered mass ownership to council house
homeowners. tenants via the Right to Buy. Yet today, the
pattern of ownership has changed: the rise
The state should, therefore, support of buy-to-let means that there are more
ownership where possible. Yet in recent frustrated would-be homeowners in the
decades, the state has instead made private rental sector than in social housing.
it harder. The fall in owner-occupation
was accelerated by a series of decisions If we are to restore mass home ownership,
by Tony Blair and Gordon Brown’s we therefore need – alongside measures
Governments: scrapping pension dividend for those who rent from the state – a way to
relief and allowing interest deductibility incentivise landlords to sell and help private
for landlords but not owners, and pushing renters to buy, to turn Generation Rent into
buy-to-let. In addition, the tightening of Generation Own.
cps.org.uk 4 From Rent to OwnTHE CORE IDEA – CAPITAL GAINS order to provide the strongest possible
TAX REBATES TO MOVE PRIVATE incentive to sell. In order to ensure high
RENTERS INTO OWNERSHIP take-up, we propose that the scheme
operate for a single year, from 2020/1, to
We propose a scheme called Help to
give people time to save for their share
Own. This would turn the Capital Gains
of the deposits. And in order to ensure
Tax payable by a landlord on sale of a
fairness, the amount that any tenant or
rented home into a rebate shared between
landlord could receive per property would
landlord and tenant (or tenants). The former
be capped at £35,000.
would get a powerful incentive to sell. The
latter would get substantial help towards
A crucial element of our proposal is that
a 10% deposit so that they can purchase
it would be offered, first and foremost, to
the home – either outright or via shared
sitting tenants – as defined at the point at
ownership.
which the scheme was announced, in order
to prevent landlords from turfing people out
There are obviously many different ways
of their homes to make way for their own
of structuring such a scheme. You need
family or friends. If the tenant or tenants
to ensure that landlords have a sufficient
did not want to take part, they would be
incentive to sell, and that tenants receive
free to nominate another first-time buyer. If
enough help to be able to afford to buy.
they did not, the landlord would be free to
You need to ensure that property price
strike a deal with any other first-time buyer
appreciation has been significant enough
– potentially with priority given to those
to generate the sums necessary to make
whose own landlords are reluctant to sell,
such a rebate attractive. And you need to
who would also be placed first in the queue
work out how to make such a system work
for shared ownership schemes.
for all landlords and tenants – not least
by offering further help to those would-be
We also suggest an online exchange
buyers whose landlords refuse to sell.
system under which tenants who do not
want to buy the specific home they are
In an early draft of this paper, we calculated
renting could either swap directly with
that a 25%/75% split of the rebate between
another tenant that they know, or find
landlord and tenant would provide enough
a more suitable property via an online
to pay for a 7% deposit for the tenant if they
marketplace.
contributed the remaining 3%. Following
consultation with stakeholders, we have
As a package, this policy would have the
adjusted our proposal to a 33%/66% split:
following benefits:
landlords would receive a third of the CGT
rebate, with tenants getting up to 66%
For tenants this would be a fantastic
of the remainder up to a limit of 6.66%
offer. They could put in £1 in savings and
of the property’s value, as long as they
end up with £3 in total in order to move
contributed 3.33%. This is a similar split
into ownership. This would mean, for an
to the original Right to Buy scheme in the
average UK property, that they would put in
1980s and gives tenants a 10% deposit so
roughly £7,000 to receive a £14,000 top-
they can move into ownership.
up – enough for a 10% stake. Those who
could not afford the whole property (for
We also suggest, for landlords who only
example those living in London) would be
own one property, that their rebate is
able to buy the majority of it under a shared
topped up with a flat figure of £3,000 in
ownership system.
cps.org.uk 5 From Rent to OwnA fair deal for landlords: For an average A fair scheme for all: We do not believe
property, the taxable gain in value is now it would be fair to simply give tenants
£87,263. A single landlord would get a CGT two thirds of whatever CGT their landlord
rebate of around £7,000, compared with an happens to be liable for. You could end
original tax bill of £21,000 or so - or closer up with one tenant receiving £100, and
to £10,000 if the suggested £3,000 top-up another on the same street in an identical
were applied. A landlord selling five such property receiving £10,000. This would
properties would get a CGT rebate of nearly quickly discredit any scheme. The support
£40,000 on a tax bill of just under £120,000†. for each tenant has to be enough to
Landlords would also avoid many of the provide a substantial contribution towards
costs associated with selling a home, such the deposit. Under our proposal every
as estate agent fees, which for an average tenant would simply receive a £2 top-up
property would be over £4,000, and the for every £1 they put in, until they reach
costs of a void period (since surveys show an overall deposit of 10%. The various
landlords usually prefer to sell an empty caps we propose for high-value, high-
property). gain properties would allow cross-subsidy
for tenants where properties have not
Promotion of shared ownership: By capping appreciated enough in value to deliver
the value of the rebate to both tenants the 6.66% required, ensuring fairness.
and landlords at £35,000 per property, And those whose landlords do not want
and reducing the relief for those with to sell would be offered first pick of other
large property portfolios, we would raise ownership schemes.
between £1 and £2.5 billion. This could be
put towards a significant shared ownership Promoting owner-occupation: At the heart
scheme for those tenants who would like of this scheme is a desire to change the
to take part in the Help to Own scheme but housing mix by replacing renters with
whose landlord does not want to – helping owners. It would therefore only be available
between 120,000 and 300,000 more people to tenants who do not own property
into ownership. elsewhere. And while people could sell their
properties on after purchase, covenants
No cost to Government: Far from costing would be applied to ensure that any
money to Government, this policy would be homes transferred would remain in owner-
revenue-neutral – even without the caps. occupation for at least a decade. Those
The CGT to pay for the policy would come who used this scheme to make a quick
from transactions that would otherwise buck would also be denied access to future
barely exist: currently, just 2% or so of home ownership schemes, such as shared
landlords sell up each year, raising around ownership or Help to Buy. This is about
£1.5 billion a year. Furthermore, any losses helping people get a long-term place on
to the Treasury – real or hypothetical – will the housing ladder, not make a quick profit.
be offset by the savings in housing benefit
from reducing the numbers of renters, both
in terms of immediate costs and the longer-
term burden of subsidising pensioners who
have never been able to afford their own
home.
† Calculated to include the Annual Exempt Amount for a single taxpayer of £11,700.
cps.org.uk 6 From Rent to OwnSHOWING IT WORKS • The areas with the highest gains are the
most valuable, meaning the £35,000
There is no point proposing such a
caps may actually raise substantially
scheme without also showing that it makes
more than the estimate we have (which
financial sense. For this scheme to work,
assumes all properties have risen by
we need house price appreciation within
the same amount rather than the most
the private rented sector to have reached
valuable ones rising the most).
the point where 66% of CGT liabilities relief
is generally enough to provide a 6.66%
THE POWER OF OWNERSHIP
deposit. In other words, the capital gain has
to be enough that the rebate can support There will be those who argue that home
tenants into ownership. ownership does not matter – or that this
is simply a handout to young people who
We calculate the necessary price should save for their own deposits as their
appreciation across the sector at between parents did.
60% and 65%. CPS researchers therefore
carried out three separate modelling But those arguments do not hold water.
exercises, all of which suggested that Polling by the Centre for Policy Studies
capital gains are higher than this: shows that making housing more affordable
is the number one way in which young
• An estimate using the growth of the PRS people think government could make their
and house price data lives better – and they overwhelmingly want
• An estimate using private landlord survey that to be done by making houses cheaper
data and house price data to own, because they overwhelmingly want
• An estimate using capital gains receipts to own rather than rent.
data
And it is not just the surge in house prices
The average rate of appreciation in the that has pushed home ownership out of
sector from three separate estimates is their reach. The changes under Labour
more than 70% - meaning that there is a described above have represented a
clear buffer between what we need and cumulative £220 billion shove towards buy-
the appreciation seen. The addition of the to-let and away from first-time buyers. It is
£35k caps further lowers the necessary surely time to put the balance right. Wanting
threshold. to own your own home is the very definition
of the right thing. It is the foundation of a
In addition, there are two reasons to think good society. It gives people more control
that this policy would raise much more of their lives, and of their futures. We need
than it costs: a home ownership revolution – in which we
hope this policy can be the first step.
• The scheme is biased toward higher
value properties – the ones most likely
to be put forward are those with high
CGT liabilities, which provide greater
revenue.
cps.org.uk 7 From Rent to Own1. Why We Need to Turn Renters
into Owners
HOME OWNERSHIP IS IN DECLINE The second, which this report is designed
The housing crisis is arguably the single to address, is the distribution of the housing
greatest social policy challenge that Britain stock, and the way that the state – in
faces. The Prime Minister has said that it is particular the Labour governments between
her ‘personal mission’ to reverse the decline 1997 and 2010 – has moved away from
in home ownership and bring housing within supporting home ownership.
reach of ‘Generation Rent’, which has been
locked out of the property market by the Since 1997, the number of households
rapid increase in house prices.1 renting in the private sector has risen
substantially from 2.1 million to 4.7 million
Since the mid-1990s, house prices have now.3 These contain around nine million
risen by 160% in real terms, while young working-age adults4 (and around 870,000
people’s incomes have grown by just 23%. retired adults).5 Almost all of these
This has meant that the ratio of median renters are living in properties owned by
house prices to median income for 25- individuals, rather than being part of a
34 year olds has more doubled over that long-term corporate scheme: there are 2.5
period, from four to eight. The consequence million buy-to-let landlords, with the mean
has been a collapse in home ownership number of properties owned running at 1.8.6
among the young. Twenty years ago, two
thirds of middle-income 25- to 34-year-olds WHY HOME OWNERSHIP MATTERS
owned their own home. Today, that figure is We know that the vast majority of current
just a quarter. 2 renters want to own. Only half of renters say
they are happy with their standard of living
At root, there are two problems here. The compared to three quarters of owners.7
first is the supply of housing, and the fact Polling shows that ownership gives you
that we have, for decades, failed to build a greater sense of freedom and control
enough properties to keep pace with over your own life, and helps you feel more
demand. This is an issue that the Centre for settled – and that these non-financial
Policy Studies has published much work on elements are actually more important than
in the past, and will again in future. the financial benefits.
1 ‘Thousands have saved money already thanks to Government’s stamp duty cut’, Downing Street Press
Release, January 2018
2 ‘The decline of homeownership among young adults’, J. Cribb, A. Hood, J. Hoyle, IFS, February 2018
3 English Housing Survey Headline Report, 2016-17, Annex Table 1.1, MHCLG
4 People in households by housing tenure and combined economic activity status of household members:
Table 1, ONS, August 2018
5 Calculated based on 8.9 million working age private renters and 8.9% of private renters being over
65, as shown in Table FA3101 (S418): Demographic and economic characteristics of social and privately
renting households, 2016-17, MHCLG
6 ‘Number of buy-to-let investors in the UK hits record 2.5 million high’, Property Funds World, April 2018
7 ‘Homeowners are happier than renters with their standard of living’, YouGov, August 2017
cps.org.uk 8 From Rent to OwnIn a survey by YouGov for the Council of The need and desire for ownership, in
Mortgage Lenders, respondents were other words, is not a British peculiarity, but
asked about what they perceived to be a universal human impulse that has been
the main benefits of home ownership. The thwarted for many young people, who
most common choice was the freedom to cannot own, and feel they will never be
‘do what you want’, while ‘an investment’ able to. Polling carried out by YouGov for
came bottom of the list.8 This can perhaps the Centre for Policy Studies earlier this
explain why owning is also linked to year found that almost one in five 18- to
greater wellbeing and life satisfaction. 24-year-olds thought it would be at least
According to the English Housing Survey, two decades before they could own their
those who own their home outright have own home, and 8% thought they would
an average life satisfaction score of 8 never be able to afford it. The affordability
points compared to 7.4 points for private of housing was also their top priority for
renters.9 government, chosen by 41% as the most
immediate way in which the state could
Academic research has also consistently improve their own lives: even among the
In a survey by YouGov for the Council of Mortgage
25-34 age group,Lenders,
onlyrespondents
the cost ofwere livingasked about
pointed to a positive link between home
what they perceived to be the main scored benefits higher.
of homeAndownership.
overwhelmingly,common
The most they choice
ownership and participation in community
was the
organisations, political freedom to ‘do
engagement, and what you want’,
wantedwhilethe‘anstate
investment’ came bottom
to prioritise making of itthe list.9 This
can perhaps
social capital in general. 10 explain why
Ownership, in owning iseasier
also linked to greater
for people wellbeing
to afford andalife
to buy home,satisfaction.
short, speaks to a According
fundamental to thehuman
English Housing Survey,ratherthose
thanwho own theirthe
reducing home outright
cost have an average
or increasing
instinct – and is a life
keysatisfaction score ofand
part of a happy the security
8 points compared of renting.
to 7.4 points for private
15
renters.10
secure society.
Academic research has also consistently pointed to a positive link between home ownership
Unsurprisingly, the upshot of all this is that
and participation in community organisations,
that many young politicalpeople
engagement, andnosocial
feel they longer capital in
Unfortunately, it is now a myth11 that the UK
general. Ownership,
is a high ownership society. The UK has in short, speaks to a fundamental human instinct
have a stake in society. Telling them that – and is a key part of
a happy
the fourth lowest rate and secure
of home society.
ownership they should learn to love renting instead is
across the EU28 and a lower rate patronising and wrong – particularly when
Unfortunately, it isthan
now a myth that the UK is a high ownership society. The UK has the fourth
non-European nations like Australia, the many of those lecturing them do so from
lowest rate of home ownership across the EU28 and a lower rate than non-European nations
USA, and Canada. their owner-occupied homes.
like Australia, the USA, and Canada.
Table
Table 1:1: Home
Homeownership
ownership rates
rates in advanced
in advanced economies
economies12 11
Home ownership
rate (latest
Country/Area available data)
Norway 82.6
Spain 77.8
European Union (average) 69.2
12
Canada 67.8
13
Australia 67.0
France 64.9
14
United States 64.2
United Kingdom 63.4
Germany 51.7
The need and desire for ownership, in other words, is not a British peculiarity, but a universal
8 ‘Home ownership or bust?
human Consumer
impulse that research
has beeninto
thwarted for manyCML
tenure aspirations’, , October
young 2016
people, who cannot own, and feel
9 English Housing Survey Headline Report, 2016-17 Annex Table 1.22, MHCLG
they will never be able to. Polling carried out by YouGov for the Centre for Policy Studies
10 For a summary of research findings in this area see: ‘Reexamining the Social Benefits of Homeownership
earlier
after the Housing this
Crisis’, year found
W. Rohe, that almost
M. Lindblad, one for
Joint Center in five 18- Studies,
Housing to 24-year-olds thought, August
Harvard University it would be at least
2013
11 two countries
Figures for EU/EEA decades (including
before they UK) could ownlatest
taken from theiravailable
own home, anddata:
Eurostat 8% Distribution
thought they would never be
of population
able
by tenure status, toofafford
type it. The
household and affordability
income group -ofEU-SILC
housing was2018
survey, also their top priority for government,
12 chosen
Housing in Canada: Keyby 41% from
results as thethemost Census’, Statistics
2016 immediate way in Canada
which, October
the state could improve their own lives:
2017
13 ‘Housing Occupancy and Costs, 2015-16’, Australian Bureau of Statistics, October 2017
14 ‘Quarterly Residential
9
‘HomeVacancies
ownershipand Homeownership,
or bust? Secondinto
Consumer research Quarter 2018’,
tenure Table 4, U.S.
aspirations’, CML,Census Bureau
October 2016, July 2018
10
15 ‘New Blue: Ideas English Housing
for a New Survey Headline
Generation’ , pp16-18,Report,
Centre2016-17 Annex
for Policy TableMay
Studies, 1.22,2018
MHCLG
11
For a summary of research findings in this area see: 'Reexamining the Social Benefits of Homeownership
cps.org.uk after the Housing Crisis', W. Rohe, M. Lindblad,
9 FromUniversity,
Joint Center for Housing Studies, Harvard Rent to Own
August
2013
12
Figures for EU/EEA countries (including UK) taken from latest available Eurostat data: Distribution of
population by tenure status, type of household and income group - EU-SILC survey, 2018HOW BLAIR AND BROWN and pushed savers to become buy-to-let
landlords. Lower interest rates since 2008,
MADE THINGS WORSE and easier credit thanks to monetary
The first buy-to-let (BTL) mortgage was stimulus and support for bank lending,
only created in 1996. Its rapid rise is compounded this by making it cheaper
partly a function of higher house prices, and easier to invest in property relative to
as well as a financial environment in other assets and hurting savers who tried
which those with assets sought out to invest elsewhere, while also freezing
investments offering decent returns. out those who were owner-occupiers with
But government action made a bad small deposits.19
situation worse. Between 1997 and 2010,
buy-to-let was made progressively more In short, while talking a great deal about
attractive compared to ownership, and the need to support the many, Labour
more attractive compared to saving ended up creating a situation where
and investing in businesses or other ownership was targeted at the few.
productive activity.
The Cameron Government did try to rein
• Abolition of Mortgage Interest Relief in the growth of buy-to-let. In 2015, for
At Source (MIRAS). This was cut in the example, it announced that landlords
first New Labour Budget and finally would only be able to deduct finance
abolished in full in 1999, the two moves costs at the basic income tax rate of 20%.
together worth around £2.3 billion a This means landlords paying at the 40% or
year (costing a cumulative total of 45% rate will shortly see a major increase
£61.9 billion to owner-occupiers, in in their tax liability. The Government
non-inflation adjusted terms).16 Most estimates that around one in five landlords
damagingly, this created an imbalance will lose out from this20 while a Council of
in the treatment between BTL landlords Mortgage Lenders (CML) survey put this
and owner-occupiers with a mortgage.17 at one in four. 21 (It is important to notice
BTL landlords obtained relief on the that this does not mean that only one in
interest costs of purchasing properties, five or one in four landlords are higher
whereas owner-occupiers did not. rate taxpayers: if the landlord owns the
property without a mortgage, this measure
• Abolition of pension fund dividend tax will not affect them).
relief. This cost pension pots between
1997/8 and 2017/8 a colossal £157 billion Yet while this might slow the growth of
(in non-inflation adjusted terms), and buy-to-let, it does not shift the dial back
substantially discouraged investment in toward ownership. Low returns elsewhere
private pensions by removing the relief mean buy-to-let remains a popular form of
available on dividend income.18 investment, with around 73,000 new buy-
to-let loans issued in the 2017-18 financial
Taken together, the effect of the abolition year, worth almost £10.5 billion (though
of MIRAS and pension fund dividend balanced by some landlords exiting the
tax relief was a £220 billion shift in market). 22
incentives that disadvantaged owners
16 Policy Measures Database, Tax; All Measures, OBR
17 Policy Measures Database, Tax; All Measures, OBR
18 Policy Measures Database, Tax; All Measures, OBR
19 MLAR Statistics: Detailed Tables, Table 1.22, FCA
20 ‘Restricting finance cost relief for individual landlords’, HMRC, February 2017
21 ‘The profile of UK private landlords’, K. Scanlon, C. Whitehead, CML , December 2016
22 ‘Mortgage Trends Update, March 2016’, Mortgage Trends (Data), UK Finance, May 2016
cps.org.uk 10 From Rent to OwnBUY-TO-LET HAS CONTRIBUTED create two million new owner-occupied
households. 26 The goal was to reduce the
TO HOUSE PRICE INFLATION
levels of renting, particularly buy-to-let
The substantial rise in house prices over
renting, and instead support ownership.
the last few decades has had a negative
To do this, a series of measures were
impact on those looking to own. But it has
implemented:
encouraged buy-to-let investors because
it acts as a signal that prices are likely to
• A 3% stamp duty (SDLT) surcharge for
continue rising, particularly as they can
those buying additional properties, which
leverage their ever-increasing equity in one
raised £1.9 billion last year.27
property to purchase another.
• The changes to mortgage interest relief
Without the impact of the buy-to-let
mentioned above, which when fully
boom on house price inflation, many
operational would save around £700
more people could have been able to
million a year. 28
purchase their first home over the last
decade. One government study in 2008
• Requiring audited receipts from landlords
estimated that buy-to-let demand had
in line with other sectors, rather than just
increased house prices by 7% relative to
deducting a wear and tear allowance,
where they would otherwise have been. 23
worth around £200 million a year.29
As the ONS’s Economic and Labour Market
Review stated as far back as 2009: ‘New
The Prudential Regulation Authority,
buy-to-let investor demand has offset the
supported privately by the Treasury, also
effects of falling first time buyer numbers
introduced new underwriting requirements
on housing demand, which also prevents
in 2017 to tighten the rules on lending to
affordability constraints from influencing
some buy-to-let borrowers, with the aim of
prices.’24 Like immigration, lack of supply or
reducing lending to this sector.30 The level
low interest rates, buy-to-let is not the silver
of relief being taken away is limited in that
bullet driving house prices higher – but it
roughly 60% of landlord purchases are now
is an unhelpful additional factor. (It is worth
made in cash (though often from money is
pointing out that recent polling by ComRes
recycled from other property sales).31
for the Centre for Policy Studies found that,
by a margin of 63% to 19%, Britons now
Despite all this, however, there is still a
think house prices in their area are too high
thriving buy-to-let market – and it is hard to
– rising to 79% vs 9% in London.)25
see what more can or should legitimately
be done to push buy-to-let landlords to
BUY-TO-LET REMAINS POPULAR sell in a punitive fashion. The result of
– AND LEGITIMATE Government fiscal and monetary policy,
The 2015 Conservative manifesto included even if pushed by the Bank of England
a pledge to build a million extra homes and under direction, has been to hammer
23 ‘Buy-to-let mortgage lending and the impact on UK house prices: a technical report’, R. Taylor, NHPAU, February 2008
24 ‘Recent developments in the UK housing market’, G. Chamberlain, p35, Economic and Labour Market Review, August 2009
25 ‘CPS Housing Poll, September 2018’
26 The Conservative Party Manifesto 2015
27 Annual Stamp Tax Statistics, 2017-18, Table 3b, HMRC, September 2018
28 Policy Measures Database, Tax; All Measures, OBR
29 Policy Measures Database, Tax; All Measures, OBR
30 Underwriting Standards for Buy-to-Let Mortgage Contracts, PRA, September 2016
31 Monthly Lettings Index January 2017, Countrywide, February 2017
cps.org.uk 11 From Rent to Ownsavers, including those who simply want a The figure for landlords obtained in the
modest return. The reason so many people CML survey is broken down in more detail
have become landlords is not because they in the table below. It shows that some 33%
want to deny homes to the next generation, of landlords have yields worth 3% or less,
but because there is a real shortage of 34% have net yields worth 4-5%, 16% have
alternative investments that can provide yields at 6-7% and 16% have yields worth
a reasonable income for those who have more than 8%.
worked hard and saved.
It is important to note that for many,
BUY-TO-LET LANDLORDS particularly smaller landlords, this yield
ARE NOT THE ‘FAT CATS’ is likely to be an overestimate as many
landlords set the costs of their time at zero.
OF CARICATURE
Yields also fluctuate over time. For example,
Contrary to media caricatures, most
if you own one property and it sits vacant,
landlords get only moderate returns. The
or you are unlucky enough to end up with
average net yield, according to a survey by
a problem tenant, you might go from a
the CML, is between 3% and 5%.32 A much
comfortable 5% to a zero or even negative
lower 2.6% annual income-only yield was
yield, on top of the stress this would bring.
reported by Investment Property Databank
(IPD) for institutional investors in UK
end up with a problem tenant, you might go from a comfortable 5% to a zero or even negative
residential property in 2015.33
yield, on top of the stress this would bring.
Net Yield Proportion of Net Yield Proportion of
landlords landlords
0% or less 7% 3% or less 33%
1% 4%
2% 7%
3% 15%
4% 16% 4-5% 34%
5% 18%
6% 10% 6-7% 16%
7% 6%
8% 6% 8%+ 16%
9% 1%
10% or more 9%
(Totals may not sum due to rounding)
Most renters can afford mortgages
The cost of renting and owner-occupation are broadly the same. Many of those who are
currently tenants could afford to own with no real increase in their housing costs. This has in
De
part been the reason behind the Government’s Help to Buy policy.
De
The problem for those renters is that without the ability to access family wealth or equity, De
they are unable to purchase a home with a reasonable deposit, which would allow them to De
start to‘The
32
pay down a mortgage and build up equity.
profile of UK private landlords’, K. Scanlon, C. Whitehead, CML, December 2016 De
33 ‘The profile of UK private landlords’, p38, K. Scanlon, C. Whitehead, CML, December 2016 De
For example, affordability of homes has fallen for most households as interest rates have
fallen. Just before the financial crisis, the cost
cps.org.uk 12 of the typical repayment mortgage for a median
From Rent to Own De
earner would have been close to 25% of their income. By 2017, this would have been well De
35 DeMOST RENTERS CAN access to ownership are therefore even
AFFORD MORTGAGES more frustrated, since their future is being
determined not by what they earn or
The costs of renting and owner-occupation
how hard they save – since amassing a
are broadly the same. Many of those who
substantial deposit while renting is nearly
are currently tenants could afford to own
impossible – but whether or not your
with no real increase in their housing costs.
parents have enough property equity that
This has in part been the reason behind the
they can gift you a deposit.
Government’s Help to Buy policy.
The problem for those renters is that
A RADICAL NEW APPROACH
without the ability to access family wealth or
IS NEEDED
equity, they are unable to purchase a home Over the last two decades, the UK has
with a reasonable deposit, which would strongly distorted the housing market. Much
allow them to start to pay down a mortgage of this is down to longer-term causes such
and build up equity. as lower interest rates, limited housing
supply, tax and other changes that pushed
For example, affordability of homes has people towards buy-to-let and away from
fallen for most households as interest rates investment in the wider economy. This has
have fallen. Just before the financial crisis, left young people locked out of ownership.
the cost of the typical repayment mortgage
for a median earner would have been close Levels of home ownership need to
to 25% of their income. By 2017, this would substantially increase. This means that
have been well under 20%.34 we need to persuade landlords to sell
up – given the slow number of new-builds
The problem is the deposits – which being created compared to the existing
are excluding even many high-income stock. After all, even if this country only built
households from ownership. The 3rd and homes for ownership, and built 250,000
4th decile of income for renting households homes each year, it would take 20 years to
have an average income of £587 and £728 match the size of the existing private rented
a week, while for home buyers the 7th and sector’s nearly five million homes.
8th deciles have an average income of £577
and £722. What this means is that the richer In the long run, it is absolutely necessary
renting households have the same income to increase the level of housebuilding in
as the poorer home-buying households.35 this country and return monetary policy to
normality. Without this, there is no way that
What distinguishes those who are locked house prices in the long run will gradually
out of ownership is not the income that fall in real terms. But given the scale of the
they earn but their access to a deposit, housing crisis, we also need to do whatever
which often comes through family money we can to help people move from renting to
and wealth. Those who are being denied owning, and give them more control of their
lives and their futures.
34 First-time buyers, lending and affordability, Table ML2, UK Finance, August 2017
35 Author’s calculation drawing on Family Resources Survey 2016-17, DWP. Income net of income related benefits
(notably Housing Benefits).
cps.org.uk 13 From Rent to Own2. Help to Own – The Policy
SHARING CAPITAL GAINS TO However, our research suggests that the
HELP GET TENANTS ON THE following design offers the best trade-off
HOUSING LADDER between incentivising landlords and helping
tenants:
As set out in the previous chapter, the
British economy has incentivised buy-to-let
• Divide the CGT relief so that 33% goes
and discouraged ownership. This is not the
to the landlord, and 66% to the tenant or
fault of individual landlords, but a political
tenants.
class that has made it too hard for people
to get on to the property ladder. We need
to find a way to turn tenants into owners. • For the tenant this would be capped
at 6.66% of the property value, with the
tenant contributing the remaining 3.33%,
Existing efforts to discourage buy-to-
and any remaining CGT surplus going
let landlords give them little incentive to
to the Treasury. This support would be
actually sell up – and do nothing to make
equalised among tenants participating
it easier for tenants and other first-time
in the scheme. (For properties with
buyers to buy the properties coming onto
multiple tenants, ownership could
the market.
either be divided equally among those
participating, or in proportion to rental
Currently, a major issue is that landlords
payments.)
will not want to sell as it will force them to
realise capital gains in order to transfer
• For smaller landlords who only own one
their money to another asset, even if that
property, we could potentially top up the
asset gives them a good return. Therefore,
landlord share with a flat £3,000 rebate
we propose that:
per property.
Landlords should be given the chance to
• Cap the total relief per property for
sell their property to the sitting tenant (or
either tenant or landlord at £35,000, with
another first-time buyer nominated by the
the remainder being redistributed or
tenant, or failing that a first-time buyer of
retained by the Treasury.
their choice). The landlord would receive a
tax break on the Capital Gains Tax and a
further share of the Capital Gains Tax would • Implement this as a time-limited one-
go to the tenant, to act as a contribution year offer, with tenants registering
towards their deposit. interest in 2019/20 for transactions to
take place in the financial year 2020/21.
There are many potential designs for this
system, and complexities which will be
addressed in the course of this report.
cps.org.uk 14 From Rent to OwnAt a stroke, this could offer 4.7 million you over the higher rate tax threshold then
households the chance to own their home, you pay 28% on any capital gains. If your
with a 10% deposit if they contribute just capital gains and income takes you over
3.33% of the property’s value. If just one the threshold (e.g. your income is £30,000,
in ten landlords and tenants took it up, it but your capital gains are £30,000, so you
would mean nearly 500,000 homes moving start off below the higher rate but move
from renting to ownership and likely more above it), you pay 18% on the share below
than a million new homeowners. This would the higher rate threshold and 28% on the
be nearly three times more than the entire share above it.
number of homes supported through the
Help to Buy Equity Loan Scheme in its first Landlords with reasonably sized capital
five years, and roughly twice the number gains and even an average income quickly
supported by both Help to Buy Equity Loan move from 0% to 28% on each £1 of capital
Scheme and Mortgage Guarantee schemes gain that they make. For example, if you
– without having the negative impact in sold two £100,0000 properties in one year,
terms of raising prices.36 and had no other income, you would pay
capital gains on an income of £100,000
HOW CAPITAL GAINS TAX WORKS that year, minus the AEA amount, and at
the two rates of 18% and 28%. Smaller
Scheme and Mortgage Guarantee schemes – without having the negative impact in terms of Deleted: on
To understand
raising prices.38 this policy in more detail, landlords therefore tend to try to dispose of
Deleted: If only a quarter of tenants and landlords took this
it is necessary to explain the current CGT any property that generates
up it would mean capital gains
nearly 1.2 million tenants becoming
owners, more than the entire first decade of the Right to
system. The rates for
How Capital Gains Tax works 2018/9 are set out receipts over a series
Buy.of years,
This has the
39
rather
potential to than
facilitate home ownership
on a huge scale and be the equivalent of a new Right to Buy.
To understand this policy in more detail, it is necessary to explain the in
below. a single year, to maximise the benefit
37
current CGT system. Deleted: Current
The rates for 2018/9 are set out below.40 of the Annual Exempt Amount
Deleted: and
capital gains limit
taxation
Capital Gains Tax rate exposure to the higher taxcapital
Deleted: bands.
gains tax
Capital Gains Tax rate
Deleted: Capital gains tax
Gains Rate paid on gains
£0 - £11,700 0% A survey by Countrywide shows the average
landlord in 2017 sold their property for
Gains within basic rate 18%
income tax limit. £87,263 more than they paid for it. This
Above higher rate income 28% equates to a 54% gain on their initial
tax threshold £46,351
investment.38 Few, however, do sell up, so
The first £11,700 is termed the Annual Exempt Amount (AEA), which anthis figure
individual canismake
a skewed representation of the
The
withoutfirst £11,700
paying any tax.isAbove
termed the Annual
this, Capital levels
Gains Tax is based on your income thatof capital
year, minus gain.Deleted:
Manycapital
landlords
gains tax choose
any relevant expenses and tax reliefs.
Exempt Amount (AEA), which an individual If your capital gains and income for
not a year
to are
sell above
their property as they generate a
£11,700 but underneath the current higher tax rate threshold (this is the 40% rate), you pay
can
18% on make without
any capital gains. paying
Where your any tax.gains
capital Above substantial liability in terms of CGT – and the
and income for a year push you over the
this,
higher Capital Gains Tax
rate tax threshold is based
then you pay 28%on on your higher
any capital gains. If your capitalthe
gainslevel
and of capital gain, the stronger
income takes
income youyear,
that over the threshold
minus any(e.g. the capital
your income is £30,000, but your
relevant incentive just to hold onto it.
gains are
£30,000, so you start off below the higher rate but move above it), you pay 18% on the share
expenses and tax reliefs. If your capital
below the higher rate threshold and 28% on the share above it.
gains and income for a year are above All this means that capital gains from
Landlords with reasonably sized capital gains and even an average income quickly move from Deleted:
£11,700
0% to 28%but underneath
on each thethat
£1 of capital gain current higher
they make.
the buy-to-let boom are coming into the
For example, if you sold two £100,0000 Formatted: Space After: 6 pt
tax rate inthreshold
properties one year, and(this
had is
no the
other40% rate),
income, you pay capitalTreasury
you would gains on anvery
incomeslowly.Deleted:
In 2014-15, there were ... [19]
of £100,000 that year, minus the AEA
pay 18% on any capital gains. Where your amount, and at the two rates of 102,000
18% and 28%.sales
Smaller of residential
Deleted: bothproperties from
making a taxable gain of £50,000,
landlords therefore tend to try to dispose of any property that generates capital gains receipts
capital gains and income for a year push the pool of 4.7 million households –
over a series of years, rather than in a single year, to maximise the benefit of the Annual
Exempt Amount and limit exposure to the higher tax bands.
A survey by Countrywide shows the average landlord in 2017 sold their property for £87,263
more than they paid for it. This equates to a 54% gain on their initial investment.41 Few,
36
however, do Equity Loan
sell up, sohelped 169,102
this figure is ahomes:
skewedHelp to Buy (Equity
representation Loan
of the scheme)
levels and gain.
of capital Help to Buy: NewBuy statistics: Data to 31
Marchchoose
Many landlords 2018, England, MHCLG
not to sell , August 2018
their property as they generate a substantial liability in
Mortgage Guarantee helped 104,763 homes: Help to Buy: mortgage guarantee scheme Quarterly Statistics, HMT,
September 2017
37 Capital Gains Tax, Gov.uk
38
38Equity Loan‘What
helpednext
169,102
for homes: Help to Buy
buy-to-let?’, (Equity Loan, scheme)
Countrywide Spring and
2018Help to Buy: NewBuy statistics:
Data to 31 March 2018, England, MHCLG, August 2018
Mortgage Guarantee helped 104,763 homes: Help to Buy: mortgage guarantee scheme Quarterly Statistics,
cps.org.uk
HMT, September 2017 15 From Rent to Own
40
Capital Gains Tax, Gov.uk
41
‘What next for buy-to-let?’, Countrywide, Spring 2018terms of CGT – and the higher the level of capital gain, the stronger the incentive just to hold Delet
onto it. Delet
terms of CGT – and the higher the level of capital gain, the stronger the incentive just to hold Delet
All
ontothis
it.means that capital gains from the buy-to-let boom are coming into the Treasury very Delet
Delet
slowly. In 2014-15, there were 102,000 sales of residential properties from the pool of 4.7
Allsales
this rate
amillion means that2.2%.
of just
households –capital
39
HMRC
a sales gains from
of justthe
raterecorded buy-to-let
2.2%. HMRCboom
42 Mortgage are coming
Lenders,
recorded thatis£6.4 into
between the£60,000
billion Treasury
of chargeable very Delet
that £6.4
slowly. gainsbillion
In 2014-15, of chargeable
there were capital gains
102,000 and
sales ofproperty £70,000.
residential This means
properties any capital
Givenfrom the pool of 4.7
41
43
capital were made on these residential sales. the rate of 18-28%
were made on these residential property 42 gains above the annual exempt amount of
million
payable households
on capital – a sales rate of just 2.2%. ofHMRC recorded that£1.1-£1.7
£6.4 billion of chargeable
sales. 40
Given the rategains,
of 18-28%this gives
payable a range
on between
£11,700 wouldroughly
be43paid at a 28% billion raised by
rate. Some
capital
residential
capital
gains
gains,
were
property
this gives
made
sales
a range
on these
thatofyear. residential
between
property
To be cautious,smaller
sales.
welandlords
will assume Given
may revenue
the
have lower
rate of
is incomes
towards18-28%the
payable
upper end
roughly on capital
of this
£1.1-£1.7 gains,
range
billion this
at £1.5
raised gives a
billion.
by residential range of between roughly £1.1-£1.7
closer to the national average income billion raised by
residential
property salesproperty
that year. sales
To be that year. Towebe cautious,
cautious, we will
of around assume
£27,300, 42 revenue
partly becauseis towards
this the
For
upper
will many
end of
assume landlords,
this range
revenue CGT is
at £1.5
is towards a fairly
the substantial
billion.
upper disincentive to sell up. The median
group are more likely to be pensioners. The average Delet
landlord’s income, according
end of this range at £1.5 billion. to a survey by the Council
gains from of Mortgage
realising Lenders,
this gain is between
of £87,263
For many landlords, CGT
44 is a fairly substantial disincentive to sell up. The median average
£60,000 and £70,000. This means any capital will gains aboveonthe
depend the annual exemptofamount
overall income the of Delet
landlord’s
£11,700
For manywould income,
landlords,be paidaccording
CGT at is a
a 28% to a survey by
fairly rate. Some smaller the Council
landlords
individual of Mortgage
may– have
selling Lenders,
as thelower
tablesincomesis between
below closer
44
£60,000
substantial and £70,000.
disincentive to This
sell means
up. The any capital gains
show.
45 Yet
to the national average income of around £27,300, partly because this group are moreabove
even the
for annual
those on exempt
average amount of
likely
£11,700
median
to would be
average
be pensioners. paid
landlord’s at income,
The gains a 28% from rate. Some smaller
realising this gainlandlords
incomes, CGTmay have
is fairly
of £87,263 will lower incomes
extensive
depend
at nearlycloser
on the overall
according
to the nationalto a survey by the
average income Council of £20,000
45 for an average gain.
income of the individual sellingof– around £27,300,
as the tables below partly because
show. Yet eventhis for
groupthoseare onmore likely
average Delet
to be pensioners.
incomes, CGT is fairly Theextensive
gains from realising
at nearly this gain
£20,000 of average
for an £87,263 gain.will depend on the overall
income
Potentialof the individual
capital gain on averageselling property
– as the (*) tables below show.
for landlord Yet even
with £65,000 for those on average
income Delet
incomes, CGT
Potential capitalis fairly
gain onextensive
averageatproperty
nearly £20,000 for an average
(*) for landlord gain. income
with £65,000
Chargeable amount Rate payable Total paid
Potential
Annual capital gain on
Exempt £11,700 average property (*) for
0% landlord with £65,000 £0 income
Amount Chargeable amount Rate payable Total paid
Annualbelow £46,350
Gains Exempt £0 £11,700 0%
18% £0
Amount
higher rate threshold
Gains belowabove£46,350 higher £75,563£0 18%
28% £0
£21,158
higher
rate rate threshold
threshold
Gains above higher £75,563 28%
Total CGT Liability £21,158 £21,158
rate threshold
Potential capital gain on average property (*) for Total CGT Liability
landlord with £27,300 £21,158
income
Chargeable
Potential capital gain on average amount
property (*) forRate payable
landlord Total paid
with £27,300 income
Potential
Annual capital gain on average
Exempt £11,700 property (*) for
0% landlord with £27,300
£0 income
Amount Chargeable amount Rate payable Total paid
Annualbelow £46,350
Gains Exempt £19,050
£11,700 0%
18% £0
£3,429
Amount
higher rate threshold
Gains above£46,350
Gains below £19,050
higher £56,513 18%
28% £3,429
£15,824
higher
rate rate threshold
threshold
Gains above higher £56,513 28% £15,824
Total CGT Liability £19,253
rate
(*) threshold
As noted this means a property with a gain worth 54% or £87,263.
Total CGT Liability £19,253
(*) As noted this means a property with a gain worth 54% or £87,263.
(*) As noted this means a property with a gain worth 54% or £87,263.
42 42
Estimated number of taxpayer disposals, value of disposals, and chargeable gains by type of asset
disposed of and length of period of ownership in 2014 to 2015, Table 14.6, HMRC, October 2017
43 43
42 42 Estimated number of taxpayer disposals, value of disposals, and chargeable gains by type of asset
Estimated number of taxpayer disposals, value of disposals, and chargeable gains by type of asset
disposed
disposed of
of and
and length
length of
of period
period of
of ownership
ownership in in 2014
2014 toto 2015,
2015, Table
Table 14.6,
14.6, HMRC,
HMRC, October
October 2017
2017
44
43 'The
43 profile ofnumber
Estimated UK private
of landlords',
taxpayer K. Scanlon,
disposals, value C.ofWhitehead,
disposals, CML,chargeable
and Decembergains2016by type of asset
45
39 Estimated number of taxpayer disposals, value of disposals, and chargeable gains by type of asset disposed
Household
disposed disposable
of and length ofincome
period and inequalityinin2014
of ownership the UK: financial
to 2015, year
Table ending
14.6, HMRC,2017, ONS, January
October 2017 2018
of and length of period of ownership in 2014 to 2015, Table 14.6, HMRC, October 2017
44
40 'Theprofile of UK
Estimated private
number landlords',
of taxpayer K. Scanlon,
disposals, value of C. Whitehead,
disposals, CML, December
and chargeable 2016
gains by type of asset disposed
45
Household
of anddisposable income
length of period and inequality
of ownership in 2014 to in theTable
2015, UK:14.6,
financial
HMRC,year ending
October 2017 2017, ONS, January 2018 17
41 ‘The profile of UK private landlords’, K. Scanlon, C. Whitehead, CML, December 2016
42 Household disposable income and inequality in the UK: financial year ending 2017, ONS, January 2018 17
cps.org.uk 16 From Rent to OwnObviously the greater the gain, the more further below – since households in owner
will be paid at the 28% rate compared to – occupation would rely on savings or the
the 18%, and the higher the income of the loan-based Support for Mortgage Interest
landlord in any year, the greater the rate of system to cover mortgage costs, rather
tax paid. than making new housing benefit claims.
A landlord with two or three properties HOW THIS POLICY SUPPORTS
thinking of moving out of renting would LANDLORDS
have a fairly hefty tax liability for doing so The Government is right to want to
and is likely to prefer maintaining renting rebalance the property market toward
instead. If they were selling a second or ownership. But it must not come only
third property then their liability would be from attacks on those who have become
even higher, as the first £11,700 would also landlords. To that end, the CGT relief for
see them having to pay tax on this at a 28% landlords would have to be attractive
rate, or around £3,000. enough for them to sell the property without
taking out so much the tenant cannot afford
CREATING AN INCENTIVE FOR to buy.
LANDLORD TO SELL AND TENANT
TO OWN – AT NO COST The Residential Landlords Association
As discussed in part 1, the current returns (RLA) have previously suggested that
available to landlords are not great. But in landlords be given a CGT reduction if they
the absence of other investment options, sell to tenants who are first-time buyers. An
and in the face of high CGT receipts, few amendment to this effect was briefly tabled
landlords are selling up. to the Finance Bill in 2016.43 According to
the RLA, 77% of landlords surveyed would
By recycling the Capital Gains Tax receipt consider selling to their tenants if their CGT
from landlords that do sell into supporting bill was waived, and two-thirds would be
the tenant into ownership, and supporting more likely to sell to tenants if the CGT bill
the landlord in selling their property, the was reduced.44
Government would be creating a large
number of transactions where none existed Given this, we think that giving landlords
before, and then taxing them – meaning a rebate worth 33% is the way forward in
this policy would raise revenue that would order to encourage them to sell. This still
otherwise not exist. leaves most of the CGT intact while giving a
fairly strong incentive to sell.
Indeed, this policy can be structured to
ensure that the Treasury does not lose For some smaller landlords – those who
out, via the various caps and thresholds only own a single property – we urge the
set out below. Not only would there be a Government to consider topping this up with
portion of revenue left for the Treasury, but a flat sum of £3,000. This is not a huge sum,
because the number of transactions should and the cost would be limited given that only
increase substantially, it should more than around 25% of properties would be covered.45
cover the predicted CGT receipts. On top But it could make a significant difference in
of this, there would also be a saving in incentivising the landlord to sell.
terms of housing benefit – as discussed
43 Consideration of Finance Bill (Report Stage), Amendment 143 (Kevin Hollinrake), House of Commons, August 2016
44 ‘Buy-to-let investors: ‘Let us off capital gains tax and we’ll sell to first-time buyers’’, The Telegraph, October 2015
45 ‘The profile of UK private landlords’, K. Scanlon, C. Whitehead, CML, December 2016
cps.org.uk 17 From Rent to OwnSuch a landlord, making an average gain of the Cambridge Centre for Housing and
£87,263, with an average income of £27,300, Planning Research (CCHPR) found that
would see a CGT rebate of £9,411 on the landlords cited the general difficulties
average property, compared with a tax bill and hassle of selling a property as a key
of £19,253. factor in dissuading them from selling (CGT
liabilities were, obviously, another common
If you had a landlord with five properties, complaint).
who had an income of £65,000, they would
see a CGT rebate of £39,234 on a tax bill of The CCHPR also found that the fact
£118,892. properties had sitting tenants in situ can
discourage sales. Landlords cited concerns
In both cases, this is a substantial reduction such as that buyers may not want the risk of
in their tax bill and could encourage them tenants not leaving when asked, and many
to sell up. But if they did not want to sell up, agreed that ‘trying to market a property
then that is their business – no one should with a tenant still there would reduce
force them to dispose of their own property, their potential market’. As a result, many
or punish them for owning it. landlords will only seek to sell a property
after it has become vacant. This of course
For many small landlords, their second means the landlord would end up losing
home and the income from it is also a money in a void period. Selling to the sitting
valuable hedge against the future – for tenant avoids such a void entirely.46
example in terms of paying for the costs of
retirement and social care. This scheme would eliminate this and also
estate agent fees – which range from 1-3%
Yet it is also true that many landlords, of the property’s value once you add in
faced with the shifting incentives described VAT, meaning a landlord selling an average
above and the prospect of a Labour £200,000 property would make a £4,000
government promising rent controls and saving on a 2% cost. So as a landlord, if you
other punishments, will be looking for an sold a typical property under this scheme,
exit. The Help to Own scheme assists them you would gain around £10,000 in tax and
with that – but we also suggest that the £4,000 in lower fees compared to a typical
Government should, as outlined below, offer sale – a £14,000 saving for a typical first
them alternative places to put the money property being sold, worth more than an
they realise that offer not just a secure additional 15% in house price gains.
income but act to promote home ownership
more broadly. HOW THE POLICY SUPPORTS
TENANTS TO BUY THEIR HOME
SELLING TO A TENANT Under the Help to Own proposal, the
HELPS LANDLORDS AVOID remaining 66.6% of the CGT receipt would
OTHER COSTS go into equity for the sitting tenant worth up
Another incentive for the landlord is that to 6.66% of the value of the property (with
this scheme would limit some of the costs some caps as discussed below).47 To take
and hassle involved in selling. There advantage of this offer, the tenants would
would be no need for any marketing, have to contribute 3.33% of the equity of
property viewings and so on. A survey by the value of the property, making it a 10%
46 ‘Landlord portfolio management - past and future ‘, pp11-14, A. Clarke and A. Heywood, Cambridge Centre
for Housing and Planning Research, July 2017
47Again, we are generally not going into the slightly more complex version where this is a small landlord
and they obtain an additional £3,000 for the property.
cps.org.uk 18 From Rent to OwnYou can also read
