Give Landlords Tax Breaks to Let to Benefit Tenants, Says Charity

Offering tax incentives to landlords would improve private rented housing for the tenants and could easily be paid for out of the extra revenue anticipated by the government from restricting mortgage interest relief. 

A housing charity has costed three policies proposed to help tenants on benefits. And the expense of each could be covered by the £808 million a year the government expects by capping mortgage interest relief by 2021-22. 

The three suggestions from the Joseph Rowntree Foundation report Using Incentives To Improve The Private Rented Sector are:

• A rental incentive allowance that lets a landlord offset some of their rental income against income tax if they rent a home to tenants receiving local housing allowance. This option is costed at £354 million a year
• Help landlords upgrade property standards by switching some improvements as deductible against income tax rather than capital gains tax at a cost of £36 million in the first year, rising to £86 million a year after nine years
• Guaranteeing landlord cashflow with some tenants on housing benefits by allowing councils to issue rent payment vouchers to priority tenants, costing £170 million a year

However, the charity admits these figures are guesswork and may be wrong.

“The costs of introducing these measures are inherently uncertain as there are unknown factors, not least the way in which landlords might change their behaviour in response to the incentives,” says the report. 

“This behavioural change could have both additional costs if more landlords are claiming the tax incentive, for example, and benefits to households in poverty, and to agencies on whom the costs associated with poverty and homelessness may fall, such as local authorities. 

“The estimates here are therefore broad-brush, intended to give an indication of the likely scale of costs associated with introducing each of the three measures in England.”