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Sheffield City Council Selective Licensing New 25% Landlord Tax to Trigger House Prices Drop?

Housing-Market / Sheffield Jul 20, 2013 - 11:20 AM GMT

By: N_Walayat


Many of Sheffield's landlords are in uproar as the Council looks set to impose what amounts to an average 25% tax on the bottom end of the cities privately rented housing sector by means of a £1000 additional charge to existing fees on EACH property, given that such targeted properties would yield an annual rental income of between £300 and £400 per month, therefore this amounts to a tax of between 20% and 27% of a years rental income that wipes out most of the profit earned which will have the effect of triggering Landlords to rush to dump and avoid the bottom end of the rental sector which suggests an imminent temporary drop in house prices at the bottom end of the cities housing market, that would also suggest an opportunity for first time buyers this summer.

Selective Licensing Scheme

The proposed starting £1000 levy per property in selective areas of the city (deprived areas) that will undoubtedly be expanded over time has much smoke and mirrors reasons attached to it such as the objective to raise standards, when its true intentions are one for creating jobs for existing staff who would have been made redundant as a consequence of deep cuts in front line services across virtually all of the Council's activities as illustrated by the 50% cut in black bin collections resulting in an fly tipping epidemic or an estimated cut of 10,000 school places that is resulting in schools being stuffed full to the rafters and making it difficult for children to even gain places at catchment area schools.

The selective licensing scheme aims to go live by start of 2014, with a council report due in September 2013, until then information is very sketchy other than that of actual feedback from landlords who have attended consultation meetings of which there are several during July and August, even the documents on the council's own websites concerning the scheme as of writing resolve to blank pages when opened -

Existing fees are £750 per properties in multiple occupation. The selective licensing fee will be for an additional £1000 fee for all properties in designated areas over the term of the licensing period.

This also means that where landlords are unable to secure a licence for whatever reason then they will be forced to release their property portfolio's onto the market and thus create a spike in supply, which represents an opportunity to first time buyers at the bottom end of Sheffield's housing market.

This is a wake up call to all of Sheffield's landlords for the selective licensing scheme WILL eventually be rolled out city wide to encompass all of the approx 40,000 of privately rented properties as the bureaucracy it manages expands to maximise the council revenues that could on just the licence fee alone total £40 million over the licensing term, let alone the fees that will be generated through penalties and enforcement actions.

A deeper analysis suggests that the consequences of this policy will be one of social engineering, i.e. the neighbourhoods initially being targeted are high immigrant areas, and thus the effect will be to release supply and depress prices further in these local markets so that the recent migrants (Roma) that populate the selective housing areas are able to buy the formerly rented properties with the objective of building of new more cohesive communities as owner occupiers on average tend to be for more responsible citizens than short-term renters.

A research into the outcome of similar schemes in other cities such as Manchester illustrates that they attained few of the results that the council presented as the objectives for initiating such schemes, but instead the exercise primarily achieved the extraction of additional payments from landlords. 8. Private Sector Rented Housing - Manchester

As Manchester illustrates this is not an isolated scheme but one that is being rolled out right across the nations cities and thus likely to either already be having or likely to have a similar effect in your own city. The consequences for which will be to drive up landlord demand for more affluent area's as they reduce exposure to scheme prone deprived area property markets.

The big picture of cities such as Sheffield cutting services whilst raising taxes is a recipe for disaster because it will result in LESS investment, as businesses relocate their activities elsewhere thus LESS long-term revenues for the cities, instead the answer should be to cut taxes to attract investment. In economic terms this will extract several more billions from the productive private sector to be wasted on the unproductive public sector as bureaucracy creates ever more bureaucracy that further feeds the ongoing stealth bankruptcy of Britain as evidenced by its consequences of exponential inflation.

Source and Comments:

Nadeem Walayat

Copyright © 2005-2013 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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