Re: Removing the reliefs
Hi Bearish,
My point is not solely that removing interest relief for landlords will cause rent hikes for tenants, but more a general observation that this is what happened when the govt (on Bacon's say-so) did so in 1998, and a prediction that this experience would be likely to be repeated if the measure was re-introduced.
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Quote:<hr> If mortgage interest relief were removed, landlords would find it extremely difficult to increase rents to compensate. <hr></blockquote><!--EZCODE QUOTE END-->
In the post-Spring 1998 period, many commentators and politicians scoffed at claims that rents would go through the roof as a result of Bacon, using the logic that rents had already reached a ceiling at that stage, that tenants could not at that stage afford to pay any more rent, and on that basis rents could not increase again. We found out pretty quickly that this was not the case and that many tenants literally had to beggar themselves by paying excessive rents with the only alternative being to sleep on the streets. As the State chose not to provide social housing by building houses of its own to cater for these people, many unfortunates did end up homeless.
Who is to say that the same won't happen again? To go back to economics, housing is not an optional purchase, it is a basic human necessity, like food or clothing. When Communism collapsed in Russia a decade ago, the people of Moscow found themselves impoverished. That did not stop them having to pay ridiculous amounts for food when the "robber capitalists" took over the main arteries of food supply in the city and began overcharging for basic foodstuffs like bread, meat, and vegetables.
There is little, if any, price elasticity in the housing market in Ireland because there are chronic shortages of accomodation in almost every sector of the market. These shortages have now existed for the better part of a decade. Which is precisely why any policy move to further worsen these shortages would be catastrophic.
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Quote:<hr> Landlords would either have to make up the difference themselves or sell their property. As I suspect most new buy-to-let landlords would be hard pressed to make up the difference themselves, many would be forced to sell thereby increasing the housing supply and reducing house prices. <hr></blockquote><!--EZCODE QUOTE END-->
The problem in that scenario is that much of the existing rented housing stock would invariably be sold to first-time buyer owner-occupiers. Fine and dandy in theory, but the problem with this scenario is many existing tenants (esp. those not in a position to buy a house themselves) would find themselves homeless as their homes are sold from under them.
This scenario is worsened by the fact that the average numbers of people living in the average "owner-occupier"-owned property is a lot less than in the average landlord-owned property.
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Quote:<hr> The hard pressed property investors, accountants, tax advisers and estate agents (whom I assume the majority of people are on his tread) are none too happy.<hr></blockquote><!--EZCODE QUOTE END-->
Remember, nobody did better out of the Bacon restrictions than existing rental property owners who saw their rental incomes rocket while others were effectively barred from entering the market to compete with them, leaving them with an effective monopoly.
I'm puzzled by how you think that accountants and tax advisors would lose out as a result of landlords having to pay more tax. Isn't it true that tax increases (such as the effective tax increase you're proposing) fuel increases in demand for accountancy and tax advisory services in order for individuals to legally mitigate the amount of tax which they owe?
Tommy
www.mcgibney.com
) hit a nerve... I wonder how many times Geoffrey read my post before replying?