Why Should Landlords get a Rates Discount?

Housing policy in Northern Ireland is a mess. It is most evident in the social housing waiting list sitting at over 44,000 households, while we build less than a thousand social housing units a year.


But it is equally a mess when it comes to the private rental sector. Policy, it seems to me, favours landlords over tenants.


Confession time – I am a landlord (as are many of our MLAs). I decided to supplement my pension entitlement through rental income. Being a landlord has its downsides, not just the bills, but also dealing with practical difficulties. I had one tenant who was so bad that I decided it was worth paying her to leave. Worse still, I had a very pleasant tenant who died – I had to get a locksmith to open the door and then we found her body. After that, I used a letting agency.


But that is no reason for landlords to be paying less rates than would an owner occupier. As landlords, we are given a discount on our rates bill. While tenants and owner occupiers may be paying their rates in full, landlords are given a 10% rebate, providing they pay their bills on time.


I presume the argument is that a discount encourages landlords to pay promptly. In which case, it should apply to everyone – add 10% to everyone’s bill and then tell them they recover it if they pay on time. But as the system stands, you pay less rates if you are a landlord and that simply cannot be fair.


There are other rates discounts. Some people have their rates paid through Housing Benefit. Others who are on Universal Credit may be eligible for a rates rebate. But these are concessions for being on low income, an entirely different issue.


This benevolent attitude to landlords is a policy with an outcome. Back in 1996, there was almost no private rental sector in NI. Today, according to the official NI figures, it accounts for 13% of housing – the same as the Housing Executive and housing associations combined.


In fact, many of the private rental properties are former social housing units that were bought under the right to buy and then rented out by the new owners. This has contributed to the fall in social housing units over recent years.


Other commercial landlords are also treated generously. Empty business premises are potentially exempted from rates for three months, with a 50% discount after that, or 100% for a low value property.


There are opportunities for us to do things differently and the time is right to consider those options, given the current financial crisis in government and the intention of Secretary of State Chris Heaton-Harris to consult on ways to increase public sector revenues.


Firstly, let’s abolish landlord rates discounts. (I will pay more, but that seems fairer.) If we want to create an incentive to pay rates quickly, then put the nominal rates up and offer everyone a discount for paying on time.


Secondly, get rid of the incentive to leave commercial properties empty. Let’s reverse the policy and instead levy a surcharge on empty buildings and vacant sites. This will push owners to make their property work for the whole economy. That might help tackle urban decline and spark more innovative use of neglected buildings in our city, town and village centres. There might, however, be a rates discount for bringing unused parts of a property back into use – such as flats above shops.


While we are at it, we can adopt some other reforms to housing policy. We should get on with mutualising the Housing Executive. By changing its status we can enable it to borrow against the value of its assets and revenue. At present, public sector borrowing rules prevent significant new social house building from the agency.


I recognise the concern that mutualisation might lead to higher pay for directors – so we could pass legislation that limits director pay in the social housing sector.


It would obviously be not just hypocritical but also wrong for me to suggest that there is no role for the private sector in the homes rental market. Without private landlords our housing crisis would be much worse. The social housing sector and owner occupation cannot on their own meet housing demand.


But private sector rents are typically higher than those in social housing. And the quality is often much poorer. Yes, there are risks for landlords, but market rents cover those. There really is no need for the state to provide an additional subsidy for private landlords.


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