A Clearer View

On Wednesday 6 June, the Joint Council for the Welfare of Immigrants (JCWI), supported by the Residential Landlords Association (RLA), won the right to launch a high court case against the controversial Right to Rent checks.

Right to Rent, which was introduced as part of Government attempts to cut down on illegal immigration in February 2016, make it a landlord’s responsibility to establish that a tenant has a right to be in the UK. These checks must be carried out on all tenants even if they are not named on the tenancy agreement.

The policy has been unpopular with landlords because of its onerous nature: landlords must check tenants' immigration status by viewing original immigration documents in the presence (or via live video link) of the applicant and make copies of the documents which must then be retained for 12 months after the tenancy expires.  Where applicants whose immigration documents are held by the Home Office and are therefore not available, landlords are required to use the Government’s Landlords Checking Service and report any instances in which individuals are not found to meet the requirements.

Furthermore, landlords who allow a tenancy to an adult who is disqualified as a result of their immigration status may currently be convicted of a criminal offence under Section 22 of the Immigration Act 2014.

The JCWI is a long-time critic of the policy on the grounds that it is incompatible with the European Convention on Human Rights. Its research found that, as a result of the scheme, 42% of landlords said that they were less likely to rent to those without a UK passport and 51% were less likely to non-EU nationals.

Similarly, a survey by the RLA found that landlords were 43% less likely to rent to anyone without a UK passport and 46% less likely to rent to a non-EU national.  

Apparently since the Right to Rent rules were introduced just over two years ago, 405 landlords have fallen foul of the rules and have been fined on average over £654 each.

Both the RLA and the JCWI believe that Right to Rent is creating a hostile environment for those who need, and are legally entitled to, housing in the UK.  Parallels have been drawn with the recent Windrush scandal, heightening concerns of discrimination.

No hearing date has yet been given for the judicial review challenge.

A petition calling on the Government to reverse two unpopular measures first introduced in George Osborne’s ‘Austerity’ Budget of 2015, have received over 10,000 signatures and in doing so has triggered a response from the Treasury.  

The first of the two measures is the controversial stamp duty surcharge on the purchase of additional or second homes, introduced in April 2016. Previously, property purchases below £125,000 were exempt from stamp duty, but the tax was raised to 3%. Additionally, the rate on purchases between £125,000 and £250,000 was raised from 2 to 5%; on property purchases between £250,000 and £925,000, it was raised from 5 to 8%; on purchases between from £925,000 to £1.5m, it was raised from 10 to 13%, and stamp duty on homes valued over £1.5m is up from 12 to 15%.  The cost of buying an investment property has risen considerably as a result.

A year later, the Government began the process of reducing the interest tax relief that buy-to-let landlords can claim on their mortgages. Until that point, landlords could deduct mortgage interest and other finance costs from their rental income before calculating their tax liability. With the majority of landlords using interest-only mortgages, some mortgage repayments could be claimed in their entirety. But the interest relief is being reduced to zero, phased over three years:

• Up to 75% in 2017-18
• Up to 50% in 2018-19
• Up to 25% in 2019-20

Under the changed system, the income tax on property profits and any other income sources is taken into account alongside other income and a tax credit worth 20% of the mortgage interest cost is available to offset against income tax.  

The petition, initiated by landlord Mark Homer in May, claims that these two measures are driving landlords away from the rental sector, resulting in increased homelessness, reduced choice for tenants and higher rents.

Recent research by the RLA found that 69% of landlords have been deterred from investing further because of the levy.

The Government’s response (which can be viewed in full here) defends the changes, claiming that the revenue was necessary as part of a package of measures outlined in the Summer Budget 2015 to help reduce the deficit and rebalance the economy.

It states that, “Landlords can still claim income tax relief at their marginal rate of tax on day-to-day running costs incurred in letting out a property, such as letting agent fees and replacing furniture,” but that, “Finance costs are different to other expenses, as having a mortgage allows the landlord to purchase a more expensive property and incur larger gains on the investment than they would have done without it.”

HMRC estimates that only one in five landlords will pay more tax as a result of the change.

The petition currently has 16,000 signatories.  If it reaches 100,000 by November 14, it will be considered for a debate in Parliament.