The chancellor has been warned about prioritising homeownership at the expense of the buy-to-let market by a committee of MPs.
The Treasury select committee published a report into last year’s Autumn Statement, which introduced a new level of stamp duty for BTL investors and owners of second homes. This levy, set at 3 per cent on top of current stamp duty rates, will come into effect in April.
Andrew Tyrie, chairman of the Treasury committee, said a number of economists pointed out the problems in the UK housing market were due to a lack of supply.
Mr Tyrie said: “The measures taken to curb buy-to-let will come at a cost, not only for those who will now face higher rents, but for the wider economy. A failure to ensure that individuals have access to a well-functioning, affordable rental market will inhibit labour mobility and reduce economic activity.
“The chancellor’s attempts to resolve what he calls a ‘homeownership crisis’ should not come at the expense of the private rented sector.
“Housing policy in the UK has been in a mess for a long time – caused by the policies of successive governments over decades and, often, their unintended consequences – sooner or later, more thorough reform will be essential.”
Office for Budget Responsibility forecasts show the surcharge will increase public sector receipts by £3.8bn over the forecast period, making it the second largest tax-raising policy measure in the Autumn Statement.
However, the committee’s report stated that there is “high” uncertainty surrounding this costing, because data on the number of transactions involving the purchase of second homes is poor, along with possible behavioural effects.
In his Summer Budget, chancellor George Osborne also said that from April 2017 the amount of tax relief on mortgage interest will be limited to the basic rate.
“While they clearly stimulate demand for owner-occupied housing, it is far less clear, despite the promises to the contrary, that the measures contained in the Summer Budget and Autumn Statement will materially increase the supply of homes,” the report read.
“This is likely to lead to a rise in house prices, sharply curtailing any overall increase in owner-occupation.”
The committee added the Mirrlees Review of 2011 found stamp duty to be an inefficient and damaging form of tax, and it criticised the government for increasing its reliance on it.
“The case for a reconsideration of the system of property taxation in the UK is therefore all the stronger,” it concluded.
Jeremy Duncombe, director of the Legal & General Mortgage Club, said: “Prospective landlords are flooding the already under-supplied housing market ahead of the introduction of the new stamp duty rate.
“This has stretched the sizeable rift between supply and demand, forcing more people to compete for properties, which is pushing up house prices.”