Member Article

Budget 2013: Is that it, Chancellor?

A leading lettings agent believes the Chancellor “may as well not have bothered“ delivering a budget which “will do almost nothing to turn around the economy” and fails “to recognise the value of the private rented sector to Britain’s economy and society”

Ajay Jagota of KIS Lettings also saw the budget as further proof the government does not recognise how Britain has become “a nation of renters” and fears some of the housing measures set out by George Osborne yesterday are “offering mortgages to people you would otherwise have turned down because the government will you out… the way we got into this mess, not the way out”.

Although the Chancellor’s annual budget statement yesterday announced a help-to-buy scheme of 20% loans for people putting down 5% deposits on homes worth less than £600,000 and a mortgage guarantee scheme designed to help lenders offer loans to people without deposits Ajay, who manages properties for some 700 landlords across the North East from branches in Sunderland, North Tyneside and South Tyneside believes there were several less risky, lower-cost measures George Osborne could have taken to meet Britain’s housing needs while encouraging economic growth, including:

· Tax breaks for landlords who rent properties to the social sector levied against future capital gains - fulfilling a growing need for social housing which pays for itself.

· Reclassifying landlords as trading companies rather than investors – allowing them to make certain businesses expenses tax deductible, encouraging them to invest and allowing them to keep rents low.

· Encouraging local authorities and housing associations to sell unwanted and unusable properties to investors for negligible fees alongside government grants, loans or financial incentives to allow them to bring the properties up to standard and bring new homes quickly to the market.

Ajay said: “Regardless of whether you believe stimulus or austerity to be the answer to the problems facing the UK economy, it was clear that George Osborne needed to take urgent, decisive and radical action with the budget. He did nothing of the sort and as a result the probability is this budget will do almost nothing to turn around the economy.

“Historically, housing has always played a major role in ending recessions and downturns but this is a government which consistently fails to recognise the value of the private rented sector to Britain’s economy and society.

“Of course it is welcome that the government has announced greater investment in housing infrastructure but not only is this investment not enough – adding just an estimated 0.06% to GDP - it was overwhelming targeted at home buyers and builders. Six out of ten people don’t believe they will ever buy a house. What help was there for them or their landlords?

“What measures we did hear aimed at revitalising the housing market are clearly extremely risky. Telling lenders to give mortgages to people they would otherwise have turned down because the government will bail them out if necessary. Isn’t that the way we got into this mess, not the way out?

“As I’ve said all along the housing market will only be revived when more credit is available. Although this is what the government is attempting, their methods are at the very best a huge gamble. Imagine if the government had had 20% shared equity or had underwritten some mortgages when the last credit crunch hit? The outcome for us all would have been much worse.

“Long term, the help-to-buy and mortgage guarantee schemes might end up being useful for buy-to-let landlords, but we need action now. Of course money is tight, but we have come up with three simple suggestions which would have made much more impact than these grand schemes, for almost no money, from today.”

This was posted in Bdaily's Members' News section by Ajay Jagota .