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Published: 23 October 2024

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The Housing Ombudsman Service, which is expected to become the main regulator of landlords after the Renters’ Rights Bill becomes law, has said that those who ignore its decisions should have to pay back rent to their tenants via a Rent Repayment Order.

Its chief, Richard Blakeway, made the comments during an evidence session at Parliament yesterday in front of its Housing Select Committee, including housing minister Matthew Pennycook.

The Renters’ Rights Bill includes proposals that will see a completely new mechanism for tenants to complain about – and get redress from – their landlords when tenancies go wrong and the Housing Ombudsman Service is widely expected to get the role.

During the committee’s questioning Blakeway said one of the areas not tackled by the Bill was enforcement and, in particular, what would happen if landlords ignored the ombudsman’s ‘remedies’ when tenants complained.

Rent repayment

Blakeway suggested that, rather than local authorities chase up non-compliant landlords, instead landlords should be subject to rent repayment orders via the First Tier Tribunal system, as is the case currently when they are found not to licenced properties within areas covered by selective or HMO schemes.

The Bill already includes measures that will see landlords who do not sign up to the ombudsman face RROs, which in London can run into tens of thousands of pounds, so this would be an extension of this idea.

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Sean Hooker, Head of Redress at the PRS, says: “The ‘Big Stick’ approach is not the full picture – of course, landlords who seriously break the law and regulations need to be cracked down on, but most tenant complaints are small issues which have a big impact of on their quality of life.

“They cannot wait weeks or months whilst a contorted process considers maladministration or enforcement; they just want things put right.

“So I agree that a strong framework is needed to intervene and help landlords to do the right thing before things get worse.

“This is essential to be put in place before the ombudsman is set loose; landlords and tenants should have access to help and advice, access to mediation and private resolution and signposting to what help is available.

“The agent redress schemes already do this at the moment and I am keen these services are available to tenants who deal directly with landlords.”

The Housing Ombudsman Service is currently the main regulator of the social housing sector.

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Published: 17 October 2024

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Reapit is worried that the new rules on rent increases will see tenants, landlords and agents tied up in a Tribunal system ill-equipped to deal with a rise in case work.

Agents are facing a massive increase in rent rise challenges once the Renters’ Rights Bill becomes law in the spring of next year, warns Reapit’s Steve Richmond (main image)

Even before the RRB becomes law, proptech company Reapit’s research found that over the number of fair or market rent cases brought before England’s Residential Property Tribunals has increased by almost 89%, from 483 to 921 over the last four years.

Once it does become law, Section 13 will be the only method landlords can use to raise rents, which can only happen once a year. Any English tenant served with the notice can challenge the rent hike, potentially leading to millions more cases going to tribunal each year.

Frustrations will grow for both tenants and landlords.”

It is likely to lead to huge delays in an already overstretched court system which is in the midst of a digitisation process that is proving problematic.

Steve Richmond, General Manager of Reapit UK&I, stressed the need for more investment and reform to expand court capacity before the Bill becomes law, saying: “Without ramping up funding for our courts and tribunals, frustrations will grow for both tenants and landlords.

Strained system

“The Renters’ Rights Bill brings significant changes but adds more pressure to an already strained system.

“We’re also concerned the government hasn’t fully considered the added costs to courts and tribunals, as no impact assessment has been published.

He adds: “If landlords lack confidence in the court and tribunal system to handle rent appeals and evictions quickly and fairly, we are concerned about the unintended consequences.

“We need the government to address the court and tribunal backlog because lengthy delays will burden both landlords and tenants with months of uncertainty. This could lead to a drop in tenant satisfaction, and we fear landlords may exit the sector.

“This would happen at a time when more homes are urgently needed in the PRS.”

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Published: 17 October 2024

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Rachel Reeves will not use her budget to increase capital gains tax on the sale of second homes.

The Times reports that capital gains on profits from the sale of shares and some other assets, which is currently levied at 20%, is likely to increase by “several percentage points”. But the rate will not change for second homes.

The chancellor will reportedly leave the rate of capital gains tax on the sale of second homes and buy-to-let properties untouched amid concerns that increasing it would cost money.

When the Conservatives lowered the rate from 28% to 24% at the last budget, the Office for Budget Responsibility said that doing so would actually raise nearly £700 million because of increased property transactions.

Ministers are reportedly concerned that raising tax on the sale of second homes would damage overall revenues.

More than half of all capital gains relates to the sale of shares, while just 12% is from the sale of property.

It is understood that ministers discussed their options and it was concluded that people would deliberately defer selling assets in a bid to avoid being hit by higher rates.

One government source suggested that revenues from increasing capital gains tax would be in the “low billions”.

Reeves is said to be drawing up plans for up to £40bn worth of tax rises and spending cuts to avoid a return to austerity and real-term cuts to government departments. Most of the money will have to come from tax rises.

Stuart Adam, a senior economist at the Institute for Fiscal Studies, told the press: “Simply increasing headline rates of CGT would raise limited revenue and cause economic damage. If the chancellor wants to raise significant sums, it is essential that rate increases are accompanied by changes to the way the tax works — removing some ill-conceived reliefs while giving more generous deductions for investment costs and losses.”

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Published: 14 October 2024

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Budget time always brings debate about tax and housing and what this means for decision-making on property sales volumes and values.

When it comes to tax, recent governments have focused on how to raise revenues more than focus on how the taxation of property can help drive better outcomes for the efficient functioning of the market. This would require major reforms that are politically challenging.

Instead, governments have introduced greater complexity to target taxes that hit a smaller proportion of homes but generate more revenue.

So what might the government do in this Budget and what would be the impact?

While the focus is on policies to support economic growth, they will have an eye on revenue raising to fund new investment. It’s fair to conclude that if you own more than one property you will be paying more in tax.

There are four areas to watch out for:

Stamp duty in England and Northern Ireland – stamp duty is devolved but most tax is paid in southern England. While there are many proposals put forward every year at budget time, I don’t see any major changes here with the exception of one eye-catching headline opportunity.

Stamp duty receipts have grown fast in recent years generating over £13bn a year. It’s really a tax on buying in southern England which accounts for 56% of the annual bill of which around half is paid for by people who own more than one home (those with the ‘broadest shoulders’ in political parlance).

At the other end of the spectrum half of sales pay no SDLT. For those that day stamp duty 16% of sales over £500k account for 70% of the total stamp duty bill.

The extended stamp duty relief for first-time buyers (FTB), bought in by Kwasi Kwarteng in 2022, is set to expire in March 2025. This helps the 8 in 10 FTBs looking to buy for below £425,000. There must be a good chance there is an announcement that this relief is made permanent. This would be sold as a big win for FTBs – it really benefits those looking to buy in southern England.

Council tax revaluation – there is an outside chance we could see a simple council tax revaluation. Today’s tax bands were set in 1992 and are out of date. A plain revaluation wouldn’t change much in terms of what people pay but it could unlock further reforms for the future.

Academics and economists want more widespread reforms that start to make the tax system fairer but these would represent major changes which have winners and losers that are very politically challenging.

CGT at marginal rate of tax? – One of the tax areas that wasn’t protected in the manifesto was capital gains tax (CGT) although it only brings in 2% of all tax receipts. Tax rates on earnings are roughly twice as high as those on capital gains. There is a school of thought that encourages people to hold onto assets, re-enforced by no capital gains when a person dies. Media speculation suggests that tax rates for capital gains could align with what a person pays on income. Thus sales of residential property could see CGT increase from 24% for higher-rate tax payers to 45%.

In the last tax year, 120,000 people sold 132,000 residential properties with an average capital gain of £50,000 on which they paid an average of £11,000 in CGT. This amounted to £1.5bn in tax on residential disposals. Moving to the marginal rate of tax would see CGT from residential disposals likely double to £3bn. Small by comparison to stamp duty but more meaningful and an extra cost for investors and second homeowners.

Investors have been hit by a succession of tax changes since 2016 and this is another in a long list of factors influencing decisions on whether to buy or sell. Second homeowners are responding to a doubling in council tax from 2025 and speculation over higher CGT rates with second home hotspots seeing homes for sale grow 4x faster than the rest of the market.

Untouchable – CGT on main residence? – one of the biggest tax breaks in the UK, and many western countries, is no tax on the capital gains made for your main residence. In the UK the Government estimates it’s worth over £36bn a year. This definitely fits in the wider reforms category and seems untouchable. It remains a big tax break that supports home ownership.

Overall it’s people with more than one property and those in southern England that will continue to pay the lion’s share of transaction and disposal-related taxes.

However, before crying out too loudly, those living in southern England benefit greatly from the way council tax operates. Any reforms to council tax would see people in southern England pay more as bills fall in lower-value markets. The tax system like everything is far from perfect.

Richard Donnell is executive director of Zoopla