There was a good report out yesterday by the Intergenerational Foundation (IF), which found that 'UK taxpayers provide £5bn annual subsidy for buy-to-let landlords', as the FT headlined its piece.
One of the key thrusts of the report is that buy-to-let properties are treated as businesses for tax purposes, although the IF believes they are more comparable to investments.
In tax terms, this means buy-to-let landlords can deduct interest on the mortgage of their rented property from taxable rent income. In addition, property owners can deduct 10% from rent received to account for repair and depreciation expenses - without having to provide any evidence of spending on the property.
It also found a number of 'loopholes' exploited by landlords, including that if the landlord occupies the property for as little as six months in the 36 months before it is sold, any gains accrued on the property in that period will not be subject to capital gains tax.
Having said all that, the framing of this by the IF is appalling. Ashley Seager, co-founder of the Intergenerational Foundation gave this quote to the media to coincide with the report's release:
"It is clear that most of these tax write-offs go to older landlords keen to take advantage of both the lack of housing supply and the demand for properties to rent by the under-35s"As if the prime issue here is the old exploiting the young! No, no, no. This is an issue of a few wealthy individuals (the report says 4% of the population are landlords, which seems high) exploiting the mass of people who can't afford to buy.
The issue is the structures that allow the accumulation of wealth, and further allow those with accumulated wealth to live parasitically from the work of others. This is about wealth, not age (income inequality has a cumulative effect so of course those with wealth are likely to be older).
And it's not only an issue for those tenants (young and old) paying ever increasing rents, and increasingly unaffordable rents (especially in London as this website shows). It's an issue for us all as an increasing proportion of tenants are having to be bailed out by housing benefit - as wages have fallen relative to rental prices - and so the welfare state is helping to fund landlords too. In the last two years, 93% of new housing benefit claimants have been from households in which at least one person works.
To try to fit this good analysis and report within the IF's intergenerational divide narrative is mistaken and misses the point. (This is not the first time we've taken issue with IF analysis and the National Pensioners' Convention's Dot Gibson responds well to intergenerational divide framing in the Guardian letters page today).
The IF rightly argues that landlords' housing is comparable to an investment (and should be taxed as such), but housing is a basic human need. It is not comparable, morally, with other investments like stamp collections, fine art, wine collections, shares or savings accounts.
Housing is a human right. Amassing wealth is not. Yet, this government is prepared to cap benefits, not rents. Even if it means homelessness for some - and the indignity of temporary or overcrowded accommodation for many more - in the Tory mind, nothing must interfere with landlords' inalienable right to own as many properties as they like and leech off of the hard-working tenants and taxpayers.
The IF's policy proposals are good (p.37 of the report) but could go further: why not limit the number of homes an individual can own? Why not restore the right of councils to control rents (which they had until 1989) to protect tenants? Why not introduce a Land Value Tax so that disused property is brought into use, and to fund new council build? Or why not introduce a Wealth Tax (as advocated here by Greg Philo here) or greater inheritance tax? And why not, perhaps least radically of all, ensure a much more progressive system of general taxation to restrict the accumulation of excess wealth in the first place?
Until we challenge the right of a few to accumulate excessive wealth, we will never end exploitation in either the housing market or the labour market.