Private landlords should be offered extra tax breaks for signing up to a new national accreditation scheme to raise standards in the sector, according to a new report.
The 30 August report, from the Chartered Institute of Housing (CIH) and the Resolution Foundation (RF), says the tax incentives would encourage landlords to improve the maintenance and management of their properties.
The report said that while private landlords currently receive around £7 billion of tax allowances a year, including for repairs and maintenance, there was no incentive to carry out work above a minimum standard.
The private rented sector has doubled in size since 1992 and now accounts for 18 per cent of all households in England, a total of four million households. Some experts have that the greater accessibility to pension funds that will take effect from April 2015 will result in a surge in buy-to-let investments as retirees use pension savings to purchase rental properties as a source of ongoing income.
The CIH and RF said that most private landlords own just one or two properties and few are full-time professional landlords, resulting in inconsistent standards of housing management.
According to the English Housing Survey, a third of private rented homes would have failed the government’s Decent Homes Standard in 2012, compared to only around one in seven social rented homes. The CIH and RF report recommends:
- creating a single, easily understood set of minimum standards – covering both property conditions and housing management – for landlords
- developing a nationally agreed set of standards for accreditation, again covering both property conditions and housing management
- giving accredited landlords a more generous tax allowance for allowable expenses – where landlords deduct the cost of repairs from profits for income tax purposes – than unaccredited landlords
- allowing landlords to treat any improvement needed to bring a property up to standard as an allowable expense, instead of deducting it from their capital gains tax liability when they sell the property, so they would get a more immediate tax benefit from the investment
- allowing accredited landlords to benefit from capital gains tax rollover relief. This would mean that if a rented property is sold and the proceeds immediately reinvested in another, the landlord would not pay capital gains tax on any profit they had made.
RF deputy chief executive Vidhya Alakeson said: “Government should incentivise those who work to raise their game in order to improve the overall standards of private renting.”