JRF report proposes policy incentives to improve the PRS in England

The Joseph Rowntree Foundation (JRF) released a report in March 2018 that sets out three options for using incentives to improve the private rented sector in England for people living in poverty.

The Using incentives to improve the private rented sector: three costed solutions report draws on findings from an international policy review, and input from a project advisory group, to propose incentive-based policy interventions that may be transferable to England. The focus was on incentives that have the potential to improve access to housing, affordability, housing quality, and security of tenure.

The report suggests that the cost of each proposal is lower than the £808 million annual increase in tax revenues by 2021-22 that the Government has recently anticipated making from restricting finance relief for landlords to the basic rate of income tax.

Three incentives to improve the private rented sector

1. Introduce a Rental Inventive Allowance

Introduce a Rental Inventive Allowance to allow landlords offset a proportion of their rental income against tax if they let their property to households in receipt of Local Housing Allowance (LHA) and charge rents that are no higher than LHA. The intended outcome of this proposal is to enable more low-income households’ access to private rented sector accommodation that is affordable to them. This proposal is estimated to cost £354 million per year.

2. Tax deductible improvements to properties

Allow specified improvements to properties to be tax deductible against income tax (rather than Capital Gains Tax, as at present). This proposal would incentivise landlords to improve the quality of accommodation they offer to low-income households and invest in energy-efficient measures which in turn would reduce fuel bills and improve affordability. This proposal is estimated to cost £36 million in the first year, rising gradually over nine years to an estimated £86 million before becoming steady.

3. Rent payment guarantee voucher scheme

Introduce a payment guarantee voucher scheme to guarantee the payment of rent for low-income households prioritised by their local authority. This proposal would incentivise landlords to let their property to low-income households or tenants they may consider as higher risk thereby improving their accessibility to accommodation. This proposal is estimated to cost £170 million per year.

The costs for each proposal can only be generally estimated and the figures above give a likely scale of costs associated with introducing these incentives in England. Further, as Proposals 1 and 2 operate via the tax system they might be more easily implemented on a UK-wide basis. The full report can be read on the JRF website.