Landlords should be incentivised to sell to tenants at a discount under a new scheme proposed by conservative think-tank the Centre for Policy Studies.
The Centre is suggesting that the government should introduce a new ‘Help to Own’ scheme, whereby for one year, the Capital Gains Tax (CGT) payable by a landlord on a sale could be turned into a rebate which would be shared between landlord and tenant.
The aim of the proposed scheme is that it would encourage landlords to sell and private renters to buy, as the rebate would contribute towards a 10% deposit to help tenants purchase the property they’re living in.
According to the think-tank, Britain now has the fourth lowest rate of home ownership in the EU. House prices have risen by 160% in real terms since the mid-1990s, while young people’s income have grown by just 23%.
How the scheme would work
When you sell a rental property, CGT is payable on gains above the annual CGT allowance (£11,700 in the 2018-19 tax year) either at a rate of 18% or 28%, depending on the amount of income and capital gains you have. Under the proposed scheme, any CGT owed would be turned into a rebate, with 33% going to the landlord and 66% to the tenant, capped at 6.66% of the value of the property.
The tenant would have to contribute 3.33% of the value of the property to the deposit, and they would be given time to save or find this money. The scheme, which would be offered first to sitting tenants, would mean that for every £1 a tenant invested to buy property they rent, they’d receive £3 which they could put towards their deposit.
The Centre for Policy Studies claims that if the scheme is adopted, and one in 10 landlords took advantage of it, it would enable more than one million people to become homeowners. If one in four landlords used it, 2.5m people who are currently renting could move into home ownership.
A spokesman for the Centre said; “We believe that the Help to Own scheme is fair, necessary and thought-through. Without a scheme like this, the recent fall in home ownership will take a very long time to reverse and the resentment in our society will grow.”
New ‘Help to Own’ scheme proposed