CIH urges government to cut tax relief on buy-to-lets

The government has been urged this week to cut the tax relief on buy-to-let properties to give first-time buyers a chance in the market.

President of the Chartered Institute of Housing (CIH) Paul Diggory suggests that the growth in the buy-to-let market is contributing to the housing crisis by pricing first-time buyers out of the market. He blames, in part, the tax relief received by buy-to-let investors, and has called for it to be scrapped.

The tax relief given to buy-to-let investors allows them to offset the running costs of properties against the tax paid on rental income, which often equates to the interest payable on the mortgage. CIH figures show 11% of all new lending in 2006 was in the buy-to-let market, totalling £100 billion, 57% higher than two years ago.

Speaking at the CIH annual conference, Diggory said: ‘The government has acknowledged there is an acute lack of affordable housing across the country, so it does not make sense to still offer tax relief to those who buy, simply to rent. Buy-to-let owners have a financial advantage over those trying to buy their first home, as well as the unintended consequence of pushing house prices even higher. ‘

The CIH is hoping the government will look at the relief in the comprehensive spending review in the autumn, and that the Chancellor of the Exchequer will remove it. Diggory also attacked the number of vacant properties bought by buy-to-let investors.