Its a £1.3bn “bung” to second home owners and landlords.
Following the Chancellor’s economic statement, the Treasury slipped out an announcement that buyers of buy-to-let properties, holiday homes and other second homes will benefit from a major reduction in stamp duty.
This comes as the government has faced criticism for its poor targeting of financial support leaving many businesses and individuals struggling. Nothing was done to address the housing shortage in the U.K. a massive building program could have kick-started a depressed economy.
Stamp duty on second homes is currently 3% higher than the standard rate, meaning that someone buying a second home would pay 8% rather than 5% on the value of the property between £250,000 and £925,000.
In 2019/20, 34% of homes bought were second properties, meaning this bung to second home owners could cost the taxpayers £1.3 billion. In a letter to Robert Jenrick, Labour has called for the government to exclude second properties from this cut – arguing that this could fund the immediate gap in local councils’ finances, which the Local Government Association predicts will be £1.2 billion by the end of the year.
Feeding the Rich! The bung will do nicely for second, third, and fourth home owners like the Housing minister Robert Jenrick, no his ministry title is not a pun on the number of houses he owns. This give away to the rich does nothing to address the shortage of social housing in the U.K.
Investment should have been made into building social houses not tax breaks to the rich.
Since the large-scale post-war expansion to house working-class families, the social housing sector has shrunk relative to the rest of the housing system. More than 1 million families are stuck on waiting lists for social housing in England as the number of council homes in Britain slumps to a record low.
Importantly, this figure does not capture unmet demand such as people sleeping rough and very low-income households in housing stress who are not on waiting lists.
When the cap on borrowing against councils’ Housing Revenue Accounts (HRA) was scrapped in autumn 2018, the government promised it would herald “a new generation of council homes”, but a new report by the Chartered Institute of Housing (CIH), the National Federation of ALMOs and the Association of Retained Council Housing has shown that councils are still facing barriers to building.
The government’s planned rents policy from 2020 onwards was generally welcomed, councils and ALMOs said they needed more long-term income stability and would prefer a 10-year policy, as opposed to the five years the government is proposing, as well as more local flexibility to allow for regional differences.
They also said the Right to Buy continues to present a problem, and in some cases it was cited as a disincentive to building, as new homes might have to be sold after only three years and possibly at less than what it cost to build them.
The respondents to the research also said that restrictions on how they can use the money they raise from selling these homes also limited building.
The recent increase to the cost of borrowing from the Public Works Loan Board (PWLB) also “tightens the finances for new build” within local authorities’ HRAs, the research found. In many cases, where councils depend on local housing companies to mount their new build programmes, it will increase their costs as loan charges are linked to PWLB rates.
Many respondents highlighted the need for more grant funding, as well as land shortages and planning constraints, even when the council is the planning authority for its own development.
Meanwhile, the industry is being held back by a shortage of skilled staff and competing priorities for finite resources, it said, such as investment in existing stock to meet new safety standards or improve energy efficiency.
Feeding the Rich: This bung to second home owners could cost the taxpayers £1.3 billion
The opposition frontbencher Thangam Debbonaire accused ministers of giving “a large tax break to owners of second homes at a time of an acute housing crisis”.
But the Conservatives hit back, saying Labour stood “against plans to help thousands of families across the country”.
Commenting Thangam Debbonaire, Labour’s Shadow Housing Secretary said:
“It is unacceptable that the Chancellor tried to sneak out this huge bung to second home owners and landlords while millions of people are desperate for support. He should be targeting support to those who need it, not helping people invest in buy-to-let properties and holiday homes.
“An unnecessary subsidy for second home-owners will only worsen the housing crisis by reducing the supply of homes overall.
“We need a credible plan from Tory Ministers to build the homes our country needs and get people on to the housing ladder. We didn’t see that this week.”
The letter to Housing Secretary Robert Jenrick, Ms Debonnaire hit out at a further reduction in the stamp duty rate for second home or buy-to-let buyers.
I am writing to you after the Chancellor’s financial statement in the Commons yesterday.
Subsequent to the Chancellor’s statement, the Treasury has revealed that the stamp duty changes will also provide a tax break for second homeowners.
The Treasury has confirmed that those looking to buy a second property or buying to let, will only have to pay stamp duty at 3% up to £500,000, rather than the 8% from a quarter a million up.
I’m seeking to clarify why your government is giving such a large tax break to owners of second homes at a time of an acute housing crisis.
If someone bought a second home yesterday for half a million pounds, they would have expected to pay £15,000 more than they would today.
You’ll know that in total, since its introduction in 2016, around 29% of all liable transactions have been subject to the Higher Rate (of Stamp duty) for Additional Dwellings. The majority (88%) of HRAD transactions are on properties sold for under £500,000.
In 2019/20, 34% of homes bought were second properties meaning this policy could cost the exchequer £1.3 billion. This could fund the immediate gap in local council finances, which the LGA predicts will be £1.2 billion by the end of the year.
At a time when we have an acute local government funding crisis, I question how the Government can justify giving a tax break to people already fortunate enough to own an existing property rather than giving councils the funding they need.
Over a million people are on council waiting lists whilst the number of new social homes has fallen by 80%. This money could be much better spent on truly affordable housing to buy or rent, rather than on a tax break for second homeowners.
The Chancellor had an opportunity to rebuild and invest in truly affordable housing to buy or rent. But he failed to take it. He talked about jobs but did little to address the skills shortage in construction sector.
Please urge the Chancellor reverse his decision to give a tax break to second homeowners. We are calling for clear action in the spirit of constructive engagement.