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CIH: Regulation and tax breaks needed to improve PRS

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CIH: Regulation and tax breaks needed to improve PRS

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Published by Max Salsbury for 24dash.com in Housing and also in Regulation

CIH welcomes Royal Assent for Housing and Regeneration Bill CIH welcomes Royal Assent for Housing and Regeneration Bill

Private sector landlords who sign up for a hypothetical national accreditation scheme should be offered tax breaks as an incentive, the Chartered of Institute of Housing has said.

In a joint report with think tank the Resolution Foundation, the CIH claims that "targeted incentives" for private landlords would encourage them to improve the maintenance and management of their properties, offering a "something for something deal".

Private landlords already receive around £7 billion of tax allowances a year, including for repairs and maintenance, but there is no incentive to carry out work above the minimum standard – a standard the CIH says is not being enforced effectively.

The report suggests that financial incentives could either take the form of new additional funds for those who sign up for accreditation, or diverting more of the existing allowance to those who do.

However, it warns that more effective regulation is needed to tackle the most unscrupulous landlords – and to ban letting agents from charging tenants fees.

The PRS has doubled in size since 1992 and now accounts for 18% of all households in England - four million households - and is the second biggest tenure in the country, after homeownership.

The percentage of private renters aged 25-34 has risen from 31% in 2008-09 to 45% in 2012-13, and the sector is also housing an increasing number of families and older people, the CIH says.

The English Housing Survey shows that a third of private rented homes would have failed the government’s Decent Homes Standard in 2012, compared to only around one in seven social rented homes, while almost one in five don’t have central heating.

Most private landlords are individuals with only one or two properties. The CIH says that very few are full-time professional landlords, which means that standards of housing management, while by no means universally poor, are inconsistent.

And the CIH warns that in the worst cases, unscrupulous landlords are able to exploit vulnerable people who have very little choice when it comes to housing.

The report recommends:

• Creating a single, easily understood set of minimum standards (covering both property conditions and housing management) for landlords and making sure that sufficient resources are made available for enforcement.
• Extending the regulation covering estate agents to letting agents and stopping letting agents charging tenants fees for their services.
• Considering the use of incentives by the government to encourage landlords to commit to higher standards (over and above the legal minimum).
• Developing a nationally agreed set of standards for accreditation (covering both property conditions and housing management).

In setting new financial incentives for landlords, the report says the government could consider:

• Giving accredited landlords a more generous tax allowance for ‘allowable expenses’ (where landlords deduct the cost of repairs from their profits for income tax purposes), compared to unaccredited landlords.
• Allowing landlords to treat any improvement needed to bring a property up to standard as an ‘allowable expense’, instead of deducting it from their capital gains tax liability when they sell the property – so they would get a more immediate tax benefit from the investment
• Allowing accredited landlords to benefit from capital gains tax rollover relief (meaning that if a rented property is sold and the proceeds are immediately reinvested in another, the landlord would not pay capital gains tax on any profit they had made).

CIH chief executive Grainia Long said: “This government has focused on measures to boost homeownership, but with more and more people living in the PRS – including more older people, more families with children and more vulnerable people from the housing waiting list – it’s vital that we look at new ways to raise standards.

"The cost of housing means that for many people, the private rented sector is the only option – but too many of them are having to put up with poor standards and insecurity.

"Ultimately, we want people to have a good choice of housing at a price they can afford, so we need to make private rent a better option.”

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