Commercial Property Blog
All posts tagged: david cameron
Holiday home taxes more changeable than British weather
It’s silly season, and the our PM (ever the PR man) is boasting of his family’s decision to holiday at home. Also known as a ‘staycation’, the fact that Mrs Cameron is about to drop a sprog and therefore can’t fly has nothing to do with the Cameron’s decision to spend two weeks in Cornwall.
As well as swimming on the beach with locals, Dave made a speech extolling the virtues of UK holidays. Having just come back from a short break with the step-kids in north Wales, I agree with him. The weather may be changeable, but good old British seaside fun is hard to beat. However, if you ask an investor trying to let a UK holiday property, their view is currently “all at sea”.
The last Labour government threatened to end valuable tax breaks on the letting of furnished holiday property (unlike conventional buy-to-lets, holiday properties are treated as businesses, so losses can be offset, and there are capital gains benefits).
Osbourne’s emergency budget reinstated the tax relief. But now a Treasury consultation document has proposed yet more changes.
Loss relief will be restricted, but the real cloud on the horizon is the number of days that the property must be available and let in order to qualify for tax breaks. The minimum number of days a property must be available to let will rise from 140 days a year to 210. Worse, the number of days it is actually let out to paying guests must rise from 70 days a year to 105 to qualify.
My colleague Tanya Powley at FT Money points out that locations outside of the warm climes of the south east may not be capable of being let for 105 days. But if landlords and landladies fail, they will lose their tax break. So, the 65,000 owners of furnished holiday lets may be set to dwindle, restricting choice for those of us following Dave’s lead by holidaying at home.
Postscript:
Like our PM, I find it hard not to think of work when I am on holiday.
So I was amused to visit the Smallest House in Great Britain when I was in Conwy last week.
Last home to a 6’3” fisherman in 1900, the tiny cottage has running water, an upstairs bedroom (via a ladder), and a fireplace (the seat doubles as the coal bunker).
At less than 70 square feet, its owner, the local historian and writer Margaret Williams charges £1 entry, and there are queues of families who come for a viewing.
It struck me that for its size, it must have the highest rental yield in the whole world!
Landlords are hidden victims of housing benefit debacle
The current row over the housing benefit reforms has completely ignored the fate of a hidden group of victims – landlords letting property to tenants on benefits.
Yes, let’s hear it for the landlords! From recent press coverage, you’d be forgiven for thinking that most were squeezing huge sums out of the government renting palaces to asylum seekers.
Don’t be fooled – not all are like the landlord to the infamous Nur family in Notting Hill who’s receiving £2,000 a week in housing benefit rent for a property that would command far less if it were let to private tenants.
This should obviously never have happened, and even David Cameron has condemned it as outrageous.
As the property editor of the Investors Chronicle, I’ve been contacted by landlord readers who are aghast at the Coalition’s reforms. Here’s what I’ve found out.
The majority of housing benefit claimants live far outside of the capital (only 14,000 of the UK’s 1m housing benefit claimants are in central London). The true scandal of our broken housing benefits system is that most landlords are not even receiving the rent they’re entitled to. Too often, the tenants fail to pass it on. Why? In April 2008, the Labour government changed the law. Instead of paying housing benefit direct to landlords, councils pay it direct to the tenants every fortnight. The touchy-feely thinking behind this was to teach people on benefits the responsibility of managing their own financial affairs. Predictably, it has been an utter disaster. Giving benefits claimants cash in the hope that they will pass it on to the landlord rather than spend it on feeding their families (or worse, feeding a drink or drugs habit) is futile. A recent survey by the charity Shelter found 65% of landlords to tenants on benefits have experienced rental arrears since the system was changed. Another survey from the British Property Federation, shows 55% of landlords will refuse to take tenants on housing benefit as a result. As for our readers, many thought that renting out cheap properties to benefit tenants in the north east and north west would be a good investment. If you can buy a house for £6,000 cash and get £3,000 a year rent from the government, you can see why. In practice, these unwanted rows of terraced houses have become privatised council estates. Tenants know the landlord lives hundreds of miles away, and feel no remorse about keeping the rent, or trashing the property. Our special report in this week’s magazine, Confessions of a Slum Landlord, tells of horrific damage to properties, including one tenant who sawed out the hot water tank and sold it for scrap. Another property was boarded up by the RSPCA when the tenant absconded leaving behind a menagerie of reptiles. You might not feel sorry for these hapless landlords, but since Maggie sold off the council housing stock, we’re reliant on the private sector to meet Britain’s housing needs. The Coalition should immediately reverse Labour’s decision, and start paying rent direct to landlords again. Its attempts to reform the system by reducing rents will just convince more landlords to abandon the sector for good. And if they do, that leaves the taxpayer to pick up the bill. Claer Barrett is the property editor of Investors Chronicle. You can click HERE to read the Investors Chronicle’s special report on housing benefit landlords, or buy a copy of this week’s magazine
Don’t look back in anger
As the police escort peeled away from Gordon Brown leaving Buckingham Palace at sunset, it was the final sad scene of New Labour’s epilogue which has lasted pretty much three years.
Ironically, it was property that became Brown’s first big broken promise.
Just as it brought down RBS and Lloyds, so the promise of three million new homes quickly turned to parody.
But after five days of chaos with the bond markets holding a blunt knife to the UK economy’s jugular we at least have some certainty.
George Osborne as chancellor is likely to settle nerves, as is the news that Vince Cable in a supporting role in charge of banks and business has agreed to scrapping the NI rise and to make £6m of cuts this year.
Some may also recall that Vince Cable was one of the many supporters of our Empty Rates campaign. There’s a video of him saying so at www.emptyrates.com
Some will question how, having come third, the Liberal Democrats now hold such sway in Cabinet with five positions and ministers in every department.
On balance though, the overwhelming majority of Tory MPs are first timers, rendering inexperience and irrelevance.
It’s not different to Labour in 1997. And if the whole thing works, the elected dictatorships that made Tony Blair so unpopular, and that has left Thatcher so hated by so many of my generation, could be a thing of the past.
Although in City land, many of course prefer straight decisions. Without Maggie overruling the corruption of Tower Hamlets council, Canary Wharf would never have been built.
We stare into a similar abyss with the Crossrail, Battersea Power Station and Elephant & Castle projects hanging in the balance. But a consensus around the economy, as with everything else, could be what works best.
Of course Clegg could never have dreamed in a million years that he’d be in Downing Street. Is he likely to be out of his depth? No more so than anyone.
Osborne – the subject (unfairly in my opinion) of much of this kind of comment will deliver his first budget in little over six weeks. It will be the most important for 30 years and it’s this that hangs in the air over the markets.
Gone is the euphoria and elation of 1997. There’s no sign of champagne or Noel Gallagher and the general feel is one of work to be done.
And in terms of getting on with business it will be a case now of ensuring that this new government understands the part property has to play in things.
The next De Montfort study is published next week and will, in all likeliness, show a stagnation of debt – something that could well come back to bite the publicly owned banks if they don’t start actively managing it properly, taking lease expiry into account and putting some of it out to market.
The aforementioned housing crisis won’t go away and of course the much discussed debates around planning will continue.
While the housing and planning jobs have not been confirmed, we should recognise that the Tories have always been open to discussion and this brave new world of fairness could well be as kind to the industry as the last 13 years of Labour.
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