Tax crackdown on second homes could be coming, as Gove ally backs ‘owning over renting’

A frontbench ally of Michael Gove has previously proposed that tax measures be used to increase home ownership, it has emerged, amid speculation over a potential government crackdown on second properties.

Neil O’Brien, who was appointed a minister in the Ministry of Housing, Communities and Local Government (MHCLG) this week, has been a proponent of using taxes to curb new buy-to-let and second home purchases.

Last year he used two articles for ConservativeHome, the website of the Tory grassroots, to set out his support for measures that favour “owning over renting”.

Mr O’Brien is seen as a policy supremo and is held in high esteem by both the Prime Minister, who drafted him in as his Downing Street “levelling up” adviser earlier this year, and Mr Gove, the new Housing Secretary, with whom he shares past links to the Policy Exchange think tank.

Mr Gove had in recent weeks also highlighted to fellow Tory MPs how striking it was that only 15 per cent of house price inflation over the past 20 years derived from a lack of supply, The Times reported.

It has sparked speculation that the new Housing Secretary may look at tweaking rules on credit and buy-to-let to help solve the housing crisis. At present, it is thought that he is currently taking stock of the policy options and has yet to make any decisions.

Tory MPs have noted that Mr Gove’s reported interest in this area appears to align with points put forward by Mr O’Brien last year.

In Feb 2020, Mr O’Brien highlighted the role of second and rental properties in the “relentless collapse” in home ownership, from 71 per cent to 63 per cent, between 2002 and 2015.

He wrote: “In 2015, we started phasing in limited changes to the tax treatment of buy-to-let and second homes. It worked. The collapse stopped… We must use the tax system to encourage new investments to flow into companies, not into inflating house prices.”

Any change in the rules should apply only to new second or rental homes, not existing landlords or second home owners, he stressed.

In August last year, Mr O’Brien went on to argue that while undersupply of new housing was a factor in declining home ownership, tax advantages that had resulted in a ballooning rented sector were also playing a large part.

“Over the decade to 2016 we added 165,000 privately owned homes a year. But 195,000 homes were transferred into the private rented sector. So more homes were owned privately but by fewer people. We could use tax to increase homeownership instead,” he wrote in an article on ConservativeHome.

While his views on home ownership have been outspoken, Mr O’Brien will focus on levelling up in his new ministerial role, while fellow minister Chris Pincher will retain responsibility for housing policy, it is understood.

Mr Gove will also be responsible for the levelling up agenda as part of his beefed-up role at the helm of MHCLG, which includes responsibility for the Union.

While the Prime Minister on Friday called levelling up his Government's “fundamental project”, Mr Gove has been warned by the Treasury not to expect a large injection of new cash in the spending review this autumn, Sky News reported.

Last summer, Mr O’Brien was among the first Tory MPs to break ranks and raise doubts about the Government’s controversial planning reforms, which suggested splitting all land into one of three categories: “growth”, “renewal” and “protected”.

In recent weeks it emerged that Robert Jenrick, before he was sacked as housing secretary, had been forced to shelve key aspects of the proposals, after the loose caucus of Conservative MPs concerned about them swelled to 100 members.

Government sources on Friday confirmed that his successor, Mr Gove, also wanted to pause the reforms.

Tory MPs said Mr Gove had signalled he was in listening mode and would take on board their concerns before proceeding with a new version of the Planning Bill.

Asked about the idea that Mr Gove could look at tax measures to curb new second and rented homes, a government source said: “Tax is a matter for the Chancellor. Michael is focused on working with MPs to review and improve the planning reforms and leading the levelling up agenda across Government.”

The Treasury is thought to be opposed to introducing punitive new tax measures targeting new second homes or landlords.

A Treasury source declined to comment, saying: “We do not comment on future fiscal policy outside of budgets.”