A plan for recovery or bad news for landlords?

Paul Shamplina, Head of Property for Hamilton Fraser and Founder of Landlord Action on his hopes and expectations ahead of the budget next month.

On 3 March, Chancellor Rishi Sunak will deliver his Spring Budget.  

Some would regard the Chancellor’s balancing act of having to provide support for those affected by COVID-19 whilst addressing public debt and encouraging consumer spending, near on impossible.  

However, with a desperate need to start repaying the national debt, which at the end of November had already cost £284 billion, I think the only thing that is certain is that it is not going to benefit many, least of all landlords. 

Budget reality

Since the reported roadmap out of lockdown appears to span well into Q3 of this year, I think the Chancellor’s first focus will be further COVID-19 support. This could include another extension to the furlough scheme and a fourth self-employed income support scheme (SEISS) grant.

It is possible he will then outline a recovery plan to start paying back the deficit.

Rumours have covered a host of tax rises, including Class 4 National Insurance, raising fuel duty, cutting pension tax relief, and changing capital gains tax, although nothing has yet been confirmed.

It will be a balancing act if it is not to turn into an exercise of ‘robbing Peter to pay Paul’. Landlords will feel that they are clearly in the Exchequer’s sights, but without a sustainable housing market, the long-term chances of coming out of all of this will be diminished.

Many in the housing sector are hoping for an extension to the stamp duty holiday beyond the current 31 March deadline. 

Particularly as strict lockdown measures have been in place for a good proportion of time since the announcement, dissuading some from making a move. 

In my view, I think at best the Government may extend it by six weeks, or to homes with offers already agreed, to prevent a mass fall-through of transactions, but I think it is unlikely to be extended much beyond that.

Budget wish list

If I had the opportunity to put forward some fair and realistic announcements that I would like to see in the Spring Budget, they would look something like this:

• Greater investment in the court system so that as soon as courts are able to reopen there is a realistic route to clearing the backlog of housing cases. We know there has been a 4,000% increase in remote hearings to keep justice moving during the pandemic and this should be extended to housing issues
   
• Targeted support for tenants who are struggling to make their rent payments. We know that rent arrears are already on the rise, which in turn has left many landlords without an anticipated, and often relied upon, source of income. They have been doing the heavy lifting in keeping tenants in their homes but with mortgage payment relief set to end, many will be unable to sustain this goodwill with empty pockets. Without help now, many will be forced out of the market but in addition thousands of tenants will be blighted by debt and wrecked credit history and forced to rely on a dwindling social housing supply from cash strapped councils.   A Government-backed tenancy saver loan, such as those offered in Scotland and Wales, paid directly to the landlord, would alleviate pressure on both tenants and landlords
   
• Since the introduction of Universal Credit, I have raised concerns. Firstly, with the fact that the new system combines both housing and living costs in one payment. Secondly, because Alternative Payment Arrangements (direct payments to landlords) are only available to those who are struggling to manage their finances. However, by this point, the tenant is already in arrears.The housing element of Universal Credit, particularly in the current circumstances with millions more people claiming the benefit, needs to be reviewed to ensure it is adequate for tenants and effective for landlords to encourage them to remain in the sector
   
• The current tax system has not only erected more barriers to investment for landlords, but it has also made being a landlord far less attractive.  This in turn is contradicting the Government’s housing objectives of providing greater housing security to tenants. Driving landlords out of the market is reducing the supply, pushing rents up and forcing landlords to cherry pick tenants they think are least likely to default on their rent. There should be more tax incentives for good landlords to remain in the market and provide tenants with longterm affordable accommodation

Housing is one of the most crucial parts of a person’s life. The pandemic has impacted the lives and finances of millions of people and the only way to get those most affected to work together is by giving them confidence in the system.

For landlords and tenants, the fact is that one does not work without the other. Therefore, in these unprecedented circumstances, the support for both landlords and tenants needs to be just that, unprecedented, and most of all, equal.

If those tenants most in need could get access to financial support which more adequately meets their rental costs, they will be far less likely to default.  Similarly, if landlords had the security of direct payments and access to a fair justice system for when things did go wrong, they will be more inclined to remain in the sector.