Calls for tax breaks for good landlords have been hailed as a “helpful contribution to the debate” by a leading property expert.
The Chartered Institute of Housing this week recommended new tax incentives for landlords willing to sign up to a national accreditation scheme designed to raise rented home standards – with an estimated 1 in every 3 properties now failing to reach the government’s Decent Homes standard.
The report argues this would encourage landlords to improve the condition and management of their properties by offering them the resources and incentive to do so.
Alongside advocating for the creation of a widely publicised and easily understood set of minimum management and property condition standards for rented homes and sufficient resources to enforce them, the report’s suggestions for encouraging landlords to commit to higher standards include:
• Giving accredited landlords a more generous tax allowance for ‘allowable expenses’, where landlords deduct the cost of repairs from their profits for income tax purposes.
• The ability to treat any improvements needed to bring a property up to standard as an ‘allowable expense’, instead of deducting it from their capital gains tax liability.
• Allowing accredited landlords to benefit from capital gains tax rollover relief if they invest the proceeds from the sale of a rental property in another property.
Ajay Jagota of Letting Agent of the Year KIS offered a cautious welcome to the CIH proposals.
The firm – famous for becoming the first letting agency to abolish deposits – manages properties for 700 landlords from branches in Sunderland, North Shields, South Shields and Welwyn Garden City and this year expanded into residential sales.
Ajay said: “At KIS we do not rent out substandard homes – but sadly some do. My concern with many of the previously proposed remedies like accreditation schemes is they risk placing huge financial and administrative burdens on law-abiding landlords without doing a thing to tackle the villains who give everyone in our industry a bad name.
“A genuine carrot and stick approach, rigorously enforced but potentially rewarding, approach may be just the thing to encourage the disreputable to clean up their act while also empowering the good landlords who want to improve their properties but can’t.
“You can expect to make a third more rent for a furnished property compared to an unfurnished one, for example, but you’ve got to remember that improvements like this aren’t always realistic.
“A significant number of landlords are only covering their costs and don’t actually make a penny out of their properties. I’m sure many of them would love to improve them, either to maximise their income or to give a better service to their tenants, but they simply can’t afford to.
“Proposals like these ones could give them both the resources and incentive to improve their homes, and may be even give them the capital to invest in new properties, which could have the added benefit of helping to tackle Britain’s housing shortage – and they’re also proposals which might be worth considering to raise standards in the lettings industry.“