Lenders have united to slam the Treasury’s planned 3 per cent surcharge on stamp duty land tax for second properties as rushed and flawed.
The Government wants £60m of the tax to help communities in England where the impact of second homes is a problem and will use some of the cash to build affordable housing.
The Council of Mortgage Lenders and the Intermediary Mortgage Lenders Association are urging the Government to rethink the higher tax rate, saying that the plans would backfire on the housing market as a whole.
The CML says there “is a risk of overkill in dampening investor sentiment to the extent that the flow of available private rented property could be disrupted” and that the number of homeowners would not necessarily increase.
It also suggests landlords could put up rents because of the proposals.
CML director general Paul Smee says: “Our longstanding view is that stamp duty is a blunt policy lever. Given the complexity of the proposals, we also suspect that in practical terms the surcharge could cause more problems than it solves.
“We urge the government at least to move away from a position where people will have to pay and then potentially claim back to one where payment is deferred, and only triggered if the buyer genuinely falls into the intended target category.
“ If the surcharge proposal is designed to promote home ownership, we think that there should be better evidence as to why this requires a reversal of growth in the private rented sector.”
Intermediary Mortgage Lenders’ Association executive director Peter Williams says the proposal is a “poorly-constructed intervention in the housing market”.
Williams slammed the short time given to respond to the consultation, which opened on 28 December and closed on 1 February.
He says: “They have no view about how this tax will impact on the market as a whole, let alone the buy-to-let market.”
Williams says that affordable housing should be funded by general taxation and not hypothecation.
He says: “What this comes down to is a small additional charge on transactions, which will eventually be swallowed, but it puts extra pressure on rents. It doesn’t seem at all sensible.”
The proposed tax surcharge would apply from 1 April 2016.
The proposed tax rise is one part of the Government’s Five Point Plan to help low-cost home ownership for first-time buyers announced in its Spending Review and Autumn Statement 2015.
Other points of the plan are to build 400,000 affordable homes by 2021, to extend the Right to Buy to housing association tenants, to speed up housebuilding and to introduce London Help to Buy.