Home owners receive significantly more financial support from the government compared with private landlords and renters, a new report has found.
The ‘Dreams and Reality – Government Finance, Taxation and the Private Housing Market’ report, carried out by The Chartered Institute of Housing, has found that home owners receive the majority of government help.
Home owners enjoy more direct tax reliefs when compared with other sections of the housing market. Currently, Net tax relief for home owners exceeds £29 billion; this equates to £39 billion received in tax relief against the estimated £10 billion that is paid in housing taxes.
In contrast, help to social housing tenants cost the government £15 billion annually, whilst £8.5 billion is given to help the plight of private renters.
For private landlords, the situation has seen them as the overwhelming losers in governmental support, with the total tax yield from the sector about £8 billion (based on income tax, corporation tax and capital gains tax). The tax landscape for landlords has changed greatly following the 2015 Budget. In the future, tax relief on mortgage interest costs will reduce, culminating in substantially higher tax bills that is likely to result in a long-term reshaping of the sector.
Terrie Alafat CBE, CIH chief executive, said: “This report demonstrates just how much government support is going to the private market, and to home-owners in particular.
“It takes a comprehensive look at the way the government supports our housing system – and we would urge ministers to do the same.
“Currently, just 21 per cent of government investment is going to affordable housing. Rebalancing this budget to support people on lower incomes who can’t afford to buy could make a big difference. It is vital that the government supports councils and housing associations to build more homes for social rent.”
Commentary from the report concluded: “We have worked through the main areas of spending and taxation related to the private housing market and added in a smaller, contextual comment on spending in the social housing sector and on
regulation. What is very clear from our discussion of the total impact of residential property taxation is that in net terms (taking tax reliefs away from tax paid) the homeownership sector’s tax position benefits to the tune of more than £29 billion a year, plus as we showed in Table 1 it also now receives more than £5 billion of government support per annum, albeit much of this in the form of loans and guarantees. 53 This highlights the complexity of arriving at final figures of the overall position by tenure – like-for-like comparisons are very difficult. By contrast the private rented sector pays more than £8-9 billion per year to government through the tax system. It then currently gets back less than £1 billion in terms of funding support for development in the form of loans and guarantees and is also is in receipt of around £9 billion annually in terms of housing benefit payments.
“Overall, this suggests that in very crude terms the private rented sector is currently in a financially neutral position; but the ending of the PRS guarantee scheme and the new taxes introduced now sees the balance tipped so that the sector becomes a net contributor. In contrast the homeownership sector is ahead by around £34 billion per year – again in very crude terms and lumping all types of funding together.
“This highlights the very heavy emphasis on supporting homeownership. Within that there is a clear intergenerational divide, with the net gains from tax reliefs largely accruing to older and longer established owners, while the equity loans and other policy measures are primarily focused on younger first-time buyers. In one sense these different strands of financial support might be said to cancel each other out, even if their costs to government are cumulative.
“These two private sector comparisons are instructive. So too is the comparison with the social rented sector where the position is equally complex. If only housing benefit, and support for social sector housing investment, are counted then the subsidy currently amounts to some £20 billion per annum. However, if housing association borrowing (currently being counted as public expenditure) and the economic subsidy from sub-economic rents are added in, then the total rises a good way towards a subsidy of £30 billion per annum.
“Thus in terms of financial support in the broadest sense the private sector is getting close to £38 billion per annum in contrast to the public sector – social housing – getting around £30 billion. Homeownership specifically is the most subsidised sector.”
Should more relief to be offered to landlords? Should more be done to help renters gain a foothold on the property ladder?
