mortgage interest write off against rental income


I accept fully that property prices would fall significantly.

My points are as follows:
  • If rents fully taxable without offset the rental sector will get squeezed
  • Far from this being a tax on the wealthiest landlords, it will hit those in negative equity the worst
I do not think it's a good long term strategy to push rental properties out of the market.

Also, as I've said above, allowing landlords to offset expenses against rent taxation actually levels the playing field as opposed to giving them an advantage.

Say a 3 bedroom property attracts €1500pm in rental income. An owner occupier compares this to the cost of a mortgage in deciding whether to buy. A higher rate tax payer who must pay full tax on the entire rent will compare the after tax rent, €750pm, to the cost of a mortgage. There can be no balance in this scenario.
 
Bronte said:
This did remove this relief after the Bacon report, but the government very quickly reinstated it as the market collapsed. So I don't think your idea is a runner.
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Are you thinking that what happened after it was reinstated (a massive bubble) was ok then?
 
Complainer said:
Are you thinking that what happened after it was reinstated (a massive bubble) was ok then?
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And it was the restriction of credit rather than any fundamental change in taxation policy that has deflated the bubble.

A change in taxation would probably have gone a long way to offset the impact of the ridiculously easy access people had to credit during the boom years.

Now that the credit situation is more realistic we are getting back to some kind of normality in terms of house prices. Compounding the correction we have already seen with punitive changes to taxation policy now is not very sensible
 
Bronte said:
You don't seriously think that landlords caused the bubble? Do you think there should be no landlords?
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I'm not attacking landlords or blaming them for the bubble. In most cases in fact, the landlords didn't really benefit from this subsidy. The real benefit of the subsidy when to whoever sold the property to the landlord (often a developer in a new development), as the subsidy allowed the landlord to offer an inflated price.

Even Kaiser agrees that this subsidy is keeping property prices and associated rents high. A phased removal of the subsidy over say three years will bring property prices and associated rents down to a sensible level. I take Kaiser's point about recent investors with high LTVs being hit worst by this, so maybe the phased removal scheme could be balanced in their favour. Those landlords that can't make a living in this new environment will sell their properties, which will then be available for residential purchase.

Yes indeed, some landlords will lose on their investments, just like a lot of other investors have lost on a whole range of investments equities and property.
 

Just to reiterate, I think removing the interest offset will push up rents as the supply of rental properties falls.

I think what we have finally got to is that we have to choose an ideology. If you believe that we should encourage as many people as possible to own their own homes and that we do not need to encourage investors in the residential market then you'll see the removal of the offset as a good thing.

If you believe that we do need to have people willing to invest in the rental market so as to ensure a sufficient supply of rental properties with affordable levels of rent then you would not favour the removal of the interest rate offset.

By the way, I don't know if you've deliberately called it a subsidy for effect. You could argue either way, or even call its removal a penalty. Words like subsidy or penalty will obviously be more emotive than calling it what it is, a change in allowable tax deductions
 
DerKaiser said:
Just to reiterate, I think removing the interest offset will push up rents as the supply of rental properties falls.
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In any other economic environment, you might be right. However, prices will only rise to whatever level the market can bear, and in the current environment, this level will be kept low. The massive oversupply in the housing market will keep rents down.
 
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