Landlords group issues warning on second homes tax

Plans to put an extra tax on the purchase of second homes will make 'vulnerable tenanats' the 'biggest losers', according to the organisation which represents landlords in Scotland

Renters will find it harder to get affordable accommodation as prices increase in response to a shortage of properties, because buy-to-let investors will choose to buy elsewhere, the Scottish Association of Landlords (SAL) said.

It is one of a number of organisations appearing at Holyrood’s Finance Committee on Wednesday to give evidence on the proposal to amend the land and buildings transaction tax.

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The Scottish Government wants buyers who already have a residential property to pay an additional 3% of the value of any new purchases costing more than £40,000.

Deputy First Minister John Swinney said the move - which will affect those buying holiday homes as well as those investing in a buy-to-let property - is aimed at helping first-time buyers.

In a written submission to the committee, the SAL said the change will have “a huge impact on the buy-to-let market and exacerbate an already serious shortage of properties in many areas”.

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It said: “We firmly believe that the biggest losers will be the most vulnerable tenants who will now find it even harder to get the accommodation they want at a price they can afford, as rents rise in response to a shortage of properties and increasing business costs that need to be met by landlords.

“As laid out by the Commission on Housing and Wellbeing, landlords have a major part to play in solving Scotland’s housing crisis precisely because of the investment they can provide at all levels of the market.

“The Scottish Government should be encouraging more investment by responsible landlords whilst ensuring the highest standards are met, instead of seemingly doing everything it can to dissuade them.

“Reducing investment will only lead to less being spent on improving housing stock across Scotland and create a space for rogue landlords and letting agents who operate outside of the high standards that the overwhelming majority of the sector are rightly held to.”

The SAL said the tax increase, coupled with a “less favourable legal framework facing landlords in Scotland”, means it is likely they will choose to invest elsewhere in the UK.

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It said the Scottish Government should instead consider offering a lower tax rate to counter the more “onerous” legal framework north of the border.

It has also suggested a number of exemptions if the tax increase does go ahead, including for those buying six properties or more, new-build purchases, joint purchases where one of the parties is a first-time buyer, the purchase of properties which are not suitable for mortgage purposes and properties which have been on the market for six months or more.