Labour plans to scrap tenant council tax will only make tenants worse off
Both the UK’s major political parties got their backsides whipped in the local elections. Then they had their pants pulled down and their backsides whipped again in the EU elections. Landlords are turning the backs on the Tories at an alarming rate. It seems that Labour is now equally keen on losing the landlord vote.
Labour is planning to attack landlords as hard as the Tories have in recent years. Yet the outcome may be the same as what the Tories have achieved – disgruntled landlords and higher rent for tenants. Stupid is as stupid does, I guess.
We warned that the ban on tenants’ fees would result in higher rents
The Tories banned tenants’ fees. They feel that this is merely a cost of doing business, and that letting agents were profiteering. Many months ago, we warned that the result would be higher rents.
The fees that agents charge tenants help to cover costs such as conducting viewings, writing tenancy agreements, vetting and background checks, and so on. Many agents rely on these fees. Without charging them, these agents would go bust. To cover these costs, most agents have only one option – to pass the costs onto landlords.
Landlords have been hit by so many extra costs in the last few years – like the reduction in tax relief on mortgage interest, lower allowable maintenance expenses, and a raft of new regulations that lead to extra costs. Many landlords can’t afford to absorb another hit to their finances. So, guess what? They simply pass the fees onto their tenants.
Agents don’t suffer from the ban on tenants’ fees. Neither do landlords. Tenants do – with an increase in their rent that will cost them every month for as long as they are a tenant. No one-off fees. A continual cost. Dumb government.
Now, Labour is being equally as dumb.
Labour plans to scrap council tax for tenants – guess who they will make payments?
A Labour commissioned report has recommended that Labour scrap council tax for all people who rent a property. Instead, only homeowners would pay a new ‘progressive property tax’. This means landlords would pay the tax, not tenants. Here’s how it would work, according to the report:
- Council tax will be scrapped
- Homeowners would pay a new property tax
- Landlords, owners of second homes, and non-resident owners would pay significantly more
- The tax would be set by the central government, not local authorities
The report says that this would ‘replace the regressive and unpopular council tax with a progressive property tax based on contemporary property values. Unlike council tax, this tax would be payable by owners, not tenants. This would result in significant administrative savings, lower levels of arrears and less court action.’
Let me tell you what will happen if Labour puts this into place. Landlords will increase their rents to compensate. And not simply by the amount of the council tax that the tenant would have paid.
Labour wants landlords to pay ‘significantly more’. Expect rents to go up ‘significantly more’. And then some. To cover extra costs of administration, and the higher management fees and the income tax they would pay on increased rental income.
You couldn’t make it up
A friend of mine is a fiction writer and a landlord. Even he couldn’t make this stuff up. It is so far offside, so underthought, and so ill-considered. My friend says that when he writes fiction, one of the most important things he must consider is realism. Actions must be realistic. “If your story and characters don’t appear realistic to the reader, the reader switches off,” he says.
If you want to know why voters are abandoning the UK’s main political parties in their droves, forget Brexit. Brexit is simply a catalyst. The real reason is that neither party listens to what the electorate thinks. They do what they think will win them more votes, without considering the real consequences of their actions. Voters – homeowners and renters – can see through the idiocy. They know that these crackpot policies aren’t realistic.
There is only one reason that landlords may need to fret about this latest idiotic policy play from Labour. That is that more tenants may need to claim benefits to pay their higher rents. It is tax and spends at its most stupid.
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