Relief because it seems that the Treasury wasn't as blind as it appeared to the distortion of the property market by speculative investing. And depressing, because it failed to act on Tony Blair's apparent concern over the impact of the booming buy-to-let sector on first-time buyers.
The details have been revealed by the PricedOut campaign, which obtained a Treasury briefing from 2004 in which it recognised that the lack of first-time buyer activity was more than compensated for by demand from buy-to-let investors.
In a rare example of the Treasury reaching a logical conclusion, it said increased buy-to-let activity had the effect of further crowding out first-time buyers, with the two parties typically seeking the same types of property. As we now know, however, this wasn't sufficient to compel the Treasury to do something about it.
PricedOut believes it should have addressed the issue by removing tax breaks for landlords. It believes these tax breaks – such as allowing buy-to-let landlords to write off mortgage interest payments against income tax, a relief taken away from other buyers a decade ago – stack the odds against first-time buyers. More help is on the way, with proposals to reduce the stamp duty faced by landlords buying multiple properties, although the stamp duty threshold increase to 250,000 announced in the Budget was limited to first-time buyers.
That was the right distinction to make, given that first-time buyers are already at a disadvantage, and it came at a time when more lenders were returning to buy-to-let. Some have made it clear that they would prefer to use their growing lending capacity to serve buy-to-let rather than first-time buyers.
However, landlord groups continue to lobby for tax breaks, pointing to the role played by the private rented sector in providing social housing. And this is where any buy-to-let tax breaks should be targeted. PricedOut does not draw the distinction, but when the market overheated in the early and mid-noughties, first-time buyers were frozen out by speculators, not long-term landlords.
Blame Kirstie Allsopp if you like, filling our TV screens with programmes encouraging homeowners to indulge their inner interior designer by snapping up properties in the latest hot spot and selling them on at inflated prices after giving them a lick of paint.
The great silver lining in the recession has been the demise of such "property porn", and of property investment seminar groups – including Inside Track, which helped to flood the buy-to-let market with inexperienced investors harbouring unrealistic expectations and few ideas on how to manage property.
This is why tax breaks aimed at the buy-to-let sector must be discriminatory, targeting professional, long-term landlords. The Scottish Association of Landlords argues that tax incentives should be offered to those landlords who provide social accommodation. And all the main political parties recognise that the private rented sector will in future play a more prominent role in providing housing where it is needed, so there is a case for tax- saving solutions aimed at encouraging certain buy-to-let investment.
The Letfirst and Private Sector Leasing schemes run by Orchard & Shipman in conjunction with the City of Edinburgh Council are prime examples of this, using private rental properties to help thousands of people who were either homeless, at risk of homelessness or unable to secure accommodation in the private sector without their help.
The other buy-to-let tax focus needs to be on long-term letting, demand for which has increased as a direct result of the housing market crisis, with more would-be buyers realising that home ownership is not an automatic right. Longer-term lets will be increasingly commonplace in the more stable housing market that may yet emerge from the downturn, in which property is a place to live and not for speculative investment.
The housing market needs a property tax system that recognises those landlords who base their decisions on long-term tenant demand and not on the quickest way to make a buck. Such reform was needed urgently in 2004, yet it was clearly not in the Treasury's interest to rein in the speculative boom, even while it acknowledged the probable implications for the wider market.