Report: Government would save cash by returning to mortgage tax relief

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Eliminating a rental tax increase may help ease the housing crisis facing renters, according to a Capital Economics analysis.

Since 2021, the mortgage interest tax relief for homeowners has been limited to the base rate of income tax.

According to the analysis, if the Bank of England base interest rate were to peak at 5% and stay above 2.5% until the end of 2027, as many predict, as much as 13% (735,000) could be lost. of private rented properties worldwide. UK compared to 2021.

This would mean a £1bn loss of Income and Corporation Tax revenue a year for the Treasury.

With the reintroduction of mortgage interest relief, Capital Economics estimates that 110,000 fewer properties would be lost from the private rental market, with the Treasury benefiting to the tune of £400m in income and corporation tax.

Ben Beadle, chief executive of the National Association of Residential Owners, said: “In 2015, the government said it wanted to ‘create a more level playing field between those who buy a house to rent and those who buy a house to live’. In doing so, it increased costs for responsible landlords and completely ignored the burden it would create for tenants.

“In the midst of an unprecedented cost of living crisis, the government must put economic reality before political pride and reverse this travesty of reform.

“Homeowner tax increases, exacerbated by rising interest rates, have deepened the supply crisis. And as this research shows, the situation is unlikely to improve until it is reversed.

“A sweeping rejection of these harmful policies is necessary to help stem the tide of lost rental properties, limit rent increases, and increase Treasury revenue.”

The Bank of England, the government and the multi-party Housing Select Committee are among those who have warned that demand across the sector is outpacing supply.

Capital Economics also found that removing mortgage rate reforms could reduce future rent inflation in the sector and reduce financial pressures on homeowners planning maintenance and improvements.

The NRLA calls on the government to carry out a full review to examine the impact of recent tax increases on the sector. Said review should cover the effect that changes in mortgage interest relief have had on the supply of private rental housing and the cost of access to rental housing.

You should also consider the logic behind the change since the Institute for Fiscal Studies has previously argued that it is incorrect to suggest that homeowners have received more favorable taxes than homeowners.