Buy-to-let investors are unfairly pocketing £5 billion a year in tax relief and the subsidy should be scrapped, a think tank has claimed.
The Intergenerational Foundation said the subsidies mostly go to help older property owners, with two-thirds of landlords aged between 45 and 65.
And they largely come at the expense of younger people, according to its report Why Buy-To-Let Equals Big-Tax-Let-Off.
BTL investors receive a number of unfair subsidies including tax relief on mortgage interest, wear and tear, letting agents' fees and buildings and contents insurance, which are not available to owner occupiers, said IF co-founder Ashley Seager.
"Most of these tax write-offs go to older landlords, keen to take advantage of both the lack of housing supply and the demand for properties to rent by the under-35s, who make up 52% of all private tenants.
"BTL has seen returns on investment increased threefold between 2000 and 2012, outperforming equities property and bonds. Its favourable tax status means that investing in BTL has been a rational decision for many older people frustrated by low returns on traditional pension savings.
"The annual subsidy is particularly unfair on those young people forced to pay high rents while also trying to save for their own first property.
"Young buyers are simply unable to compete with the buying power of BTL investors or benefit from the same levels of tax relief on their mortgage loans."
It singled out government policy towards capital gains tax for particular criticism, as landlords have a range of ways to reduce their liabilities, in many cases to zero, when selling properties.
IF challenged the argument that BTL should have the same tax status as other forms of business by arguing that it provides little social or economic benefit.
New home building has not been delivered in the right place for the right people, buyers have to struggle with unfair competition and few jobs are created through BTL.
It is calling on all political parties to address this issue, for example, by deducting CGT at source, as happens in other European countries, and reducing landlords' ability to set their mortgage interest against tax, abolishing the wear and tear allowance, and other measures.
Comments
These actions would certainly reduce the number of rental properties available and increase rents in the UK. With higher rents young people would probably find it even harder to save for a deposit! The problem is the supply of property. People are living longer and holding on to the family homes that the next generation want. Under utilised family homes are causing much of the current lack of supply.
Incentivise the older generation downsize and the market will become