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Thursday, May 01, 2014

New tenancy agreement needs incentives

The Government proposal to promote a new longer term tenancy agreement is a great idea.  Having a longer term tenancy is good for tenants (greater security) and landlords in that it gives them long-term tenants and less chance of a costly void.  In my view it also needs an incentive for landlords to adopt it or else it is destined to fail. Landlords will not give up the opportunity to obtain vacant possession and raise the rent regularly unless their is a significant advantage in these tenancies to compensate them for this loss of control (why would we?!).  I would suggest that the Government should use so call 'Nudge Economics' to incentivise landlords to adopt longer-term tenancies.

A long-term tenancy
The Government could and should incentivise landlords to embrace a longer term tenancy agreement of say 3+ years by giving them certain tax advantages in return for granting these types of tenancy.  For example, one clear additional deduction would be to allow a landlord to offset the whole of their borrowing cost against rental profits (not just the interest charges).  This would incentivise landlords to buy and invest for longer-term tenants.  Something that many of us in the private rented sector recognise is a good thing for tenants, landlords and general housing policy.

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1 comment:

Maryann said...

The government should also make it easier to evict rogue tenants, by reducing the time to evict a tenant and regain possession from 6 months to 4 months.

Why should tenants who do not pay rent for more than 2 months, continue to stay on, owe more and more, and damage the property ?