SNP landlord MSPs criticise tax changes in budget aimed at reducing second-home ownership

Two SNP MSPs have questioned the Scottish Government’s decision to raise a key tax on second homes and buy-to-let properties that is set to bring in £35 million as part of the Budget.

Kenneth Gibson, the finance committee convener, and Michelle Thomson, representing Falkirk East, both took aim at the decision to increase the Additional Dwelling Supplement from 4 per cent to 6 per cent, announced by interim finance secretary John Swinney last month.

Both MSPs are landlords, declaring their interest at the start of their contributions, and criticised the potential impact of the policy change on rents and the availability of rental properties.

Mr Gibson, who represents Cunninghame North, told the minister for public finance, Tom Arthur, there was no “incentive” to try to reverse a drop in the availability of properties in the private rental sector.

He said: "I think the issue that is being made here, everyone is aware of rising interest rates, the prevailing economic conditions. But I think the concerns from the market that are being expressed are that the Scottish Government is actually not working to mitigate that, but is actually going in the opposite direction.

"For example, Savills have said that the accumulation of measures have reduced the supply of rented accommodation in Scotland such that, for example, there are 29 per cent fewer properties listed in 2022 than in 2016. There’s a downward slope and there doesn’t seem to be any incentive to try and reverse that.

"The tax in Scotland will be more than double than England, so that could in actual fact discourage investment in new property in Scotland.”

Mr Gibson said he believed the tax, which is payable on the total purchase price of a second home even if it is destined for commercial use such as short-term-lets or buy-to-let property, results in competitors to first-time buyers just paying more.

SNP MSPs questioned the changes to the Additional Dwelling Supplement at Holyrood's finance committee

He said: “Where is the evidence that the Additional Dwelling Supplement has actually helped first-time buyers and encouraged them into the market? Although it may impact on second homes, I’m not aware of any evidence that suggests its actually helped increase the number of people that are able to get onto the housing ladder in the first place.”

Ms Thomson, formerly a member of the Scottish Association of Landlords and the owner of Thomson Holdings, a property investment company, and director of Senza Rit Ltd, a property management company, said there was anecdotal evidence of landlords leaving the market. This, she said, would “absolutely have an impact on available supply and therefore rents”.

“What I’m trying to explore is your consideration of the housing market where for a variety of reasons it may well be that the supply for properties to rent is diminished,” she said. “There is anecdotal evidence of that already happening.

"But it can’t be that far down the road until it is going to have an effect in the wider market that will disproportionately affect people who need to rent and continue to rent in terms of rent rises and people exiting the market.”

The SNP MSP added: “Can I impress upon you that as this is being thought about within the Scottish Government, that people look across the piece at a variety of stakeholders and also critically look at the housing market as a market.

"I’m not saying I agree with all of this and I am very supportive of what the Scottish Government is trying to achieve. But there has to be an assessment of the effects, of the behavioural effects and so on. Thus far, I haven’t been convinced there is a recognition of that, and I certainly haven’t seen any data.”

Mr Arthur said the tax was intended to help first-time buyers compete. He defended the tax, saying: “I appreciate as we move into this year in the wake of the economic headwinds that we’re facing and in the wake of rising interest rates, the impact as well of the mini-budget leading to mortgage products being withdrawn, all of that as combined is going to have an impact.

"But I think if you look at the revenue we are raising, LBTT [land and buildings transaction tax] is a very strong performing tax and again forecast going forward to be a tax that provides a net gain once the BGA [block grant adjustment] is factored in.

"The decisions we take are balanced and there to support first-time buyers, but also to raise revenue and that is what they are doing.”

Ross Greer, the Scottish Green’s member of the finance committee, defended the additional dwelling supplement.

He said: “Increasing the ADS will raise tens of millions of pounds to keep our public services going during this cost of living crisis. That money will come overwhelmingly from those who are already wealthy enough to be able to buy extra properties.

“It's also one of the ways through which we can tackle the huge generational inequality in home ownership. Many young people are locked into the private rental market when they would far rather buy their own home, like their parents did. That’s because the housing market is stacked in favour of buy-to-let landlords and those who already own property. Making it that bit harder for landlords to hoard even more homes and that bit easier for a first time buyer will be a very positive outcome of this change.

“It sits alongside other measures such as the rent freeze introduced by the Scottish Greens and new powers for councils to crack down on the spread of short term AirBnB style lets, all of which will contribute to addressing the inequality in our housing sector.”

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