The government is considering giving landlords a capital gains tax break to encourage them to sell second homes, according to reports.
It’s thought a number of ‘accidental landlords’ are being targeted to free up supply, meaning those who don’t see themselves as professional landlords.
An example of an accidental landlord is somebody with a property who inherits another one, which they choose to rent out opportunistically.
The Sun quotes a source close to the matter, saying: “The Prime Minister wants to shrink the buy to let market,” as it’s widely reported that Boris Johnson wants to make a radical move on housing before the next election.
Cutting or eliminating capital gains tax could have a big impact. As it stands basic rate taxpayers pay capital gains of 18%, while it rises to 28% for higher rate taxpayers.
The idea is at an early stage, as the government looks to encourage more renters to become homeowners, the latter of which are typically more likely to vote Conservatives.
Stamp duty cut for downsizers
In addition to accidental landlords, the government is weighing up whether to hand downsizers a stamp duty exemption in a bid to encourage housemoving.
It’s thought that a number of older people are reluctant to move because of the high stamp duty costs when they buy a smaller property. Therefore, if more moved it’s would free up more homes suitable for families to buy.
As it stands four in 10 properties are officially ‘under-occupied’, meaning they have additional bedrooms not being used.
And last November a minister said he wanted to encourage the elderly “rattling around” in large houses to downsize.
However Nick Sanderson, chief executive of Audley Group, isn’t convinced a capital gains tax break is a good move.
He said: “The crux of the issue is simply that there aren’t enough housing options available for people looking to downsize. The Treasury can throw incentives at the market as much as it pleases, but many potential downsizers have nowhere they’d like to move and without changing that, how can the incentives work?
“The retirement living market which provides specialist properties with health and wellbeing support as it is needed is chronically underserved and this is what needs addressing first. Reform planning rules to mandate age-specific housing, increase supply and only then bring in financial incentives to encourage downsizing. It’s this systematic approach that is needed if we are to provide solutions to the housing crisis.
“Work has started with the government underlining its commitment to more specialist retirement housing and the formation of the Housing with Care taskforce. Now planning reform has be the very first point on the agenda.”