The Intergenerational Foundation (IF) is a non-­‐party-­‐political charitable think tank researching fairness between generations. IF believes policy should be fair to all – the old, the young and those to come. IF calls on the government to introduce further measures to dampen buy-­‐to-­‐let (BTL) investment. Recent government reforms, although welcome, have been insufficient. Unless urgent action is taken, the distorting effect of BTL will increase house prices and further exclude first-­‐time buyers (FTBs) from gaining a foothold on the UK property ladder. Buy-­‐to-­‐Let: • 2015 is set to break BTL investment records in spite of recent government reforms to BTL taxation in the Summer Budget (Moody’s).1 • During the first three months of 2015 £7.6 billion was borrowed by landlords. In the same period the value of first-­‐time buyer loans declined: £8.9 billion down from £11.2 billion (Bank of England).2 • In August 2015 BTL mortgage lending increased by 37.9% compared to the same period in 2014 (Council for Mortgage Lenders).3 • Landlords now account for 15% of all mortgage lending (Financial Times).4 • “Landlord lending poses a risk to the country’s financial stability” (Bank of England).5 • BTL mortgages do not face the same “affordability” checks as residential mortgages since Mortgage Market Reviews exclude rental properties (Financial Conduct Authority).6 • BTL applicants are given preferential treatment to other applicants, especially FTBs, with interest-­‐only mortgages and high loan-­‐to-­‐value (LVT) ratios offered. • BTL investors are older, with two-­‐thirds of landlords in the 46–65 year old age group (IF).7 • Pension reforms involving the ability to take out 25% tax-­‐free from a pension pot have led to more investment in BTL, further overheating the housing market (The Guardian). 8 First-­‐time Buyers: • From 2003/04 to 2013/14, the percentage of 25–34year olds who are owner-­‐occupiers fell from 58.6% to 35.9%.9 • The percentage who were living in the private rented sector rose from 21.4% to 48.2% (English household Survey).10 • The average price of a first home has passed £280,000 (ONS).11 • The average price paid by a first-­‐time buyer rises by another 3.8% in a year (ONS).12 • More than 1 in 5 young people (20–45 year olds) have completely given up hope of ever owning a home (Halifax). • Generation Rent 2015: 52% of 8000 young people surveyed believe that renting rather than buying will become the norm within the next 20 years (Halifax).13 1 Moody’s (2015); https://www.moodys.com/research/Moodys-­‐UK-­‐buy-­‐to-­‐let-­‐RMBS-­‐performance-­‐continued-­‐to-­‐improve-­‐-­‐PR_336523; accessed 15/10/15 2 Bank of England (2015); http://www.bankofengland.co.uk/pra/Pages/regulatorydata/mlar/2015/mar.aspx 3 Council for Mortgage Lenders (2015); http://www.cml.org.uk/news/press-­‐releases/house-­‐purchase-­‐lending-­‐up-­‐9-­‐in-­‐august-­‐on-­‐last-­‐year/ 4 Financial Times (2015); http://www.ft.com/cms/s/0/2c0281c4-­‐2570-­‐11e5-­‐9c4e-­‐a775d2b173ca.html -­‐ axzz3oe6rOfT3 5 op.cit. 6 Financial Conduct Authority (2015); http://www.fca.org.uk/static/documents/consultation-­‐papers/cp15-­‐03.pdf; para 1.9. 7 Kingman (2013); Intergenerational Foundation; Why Buy-­‐To-­‐Let Equals Big-­‐Tax Let-­‐off”; http://www.if.org.uk/archives/4668/tax-­‐payers-­‐
fund-­‐5-­‐billion-­‐annual-­‐buy-­‐to-­‐let-­‐tax-­‐write-­‐offs 8 The Guardian (2015); http://www.theguardian.com/society/2015/sep/02/home-­‐shortage-­‐and-­‐lending-­‐rules-­‐why-­‐generation-­‐rent-­‐is-­‐out-­‐
of-­‐luck 9 English Household Survey (2013 to 2014); https://www.gov.uk/government/statistics/english-­‐housing-­‐survey-­‐2013-­‐to-­‐2014-­‐headline-­‐
report 10 ibid. 11 Office of National Statistics (2015); http://www.ons.gov.uk/ons/rel/hpi/house-­‐price-­‐index/august-­‐2015/stb-­‐hpi-­‐august-­‐2015.html 12 ibid. 13 Halifax (2015) Generation Rent Report 2015; http://www.lloydsbankinggroup.com/globalassets/documents/media/press-­‐
releases/halifax/2015/150407-­‐halifax-­‐generation-­‐rent-­‐report_final.pdf