The Rent a Room tax relief should be increased

Shelter have produced a long report with lots of maps and figures about how expensive it is to privately rent these days. There are lots of references to rents being unaffordable.

This is defined as:

Median private rents for two bedroom homes costing more than 35% of median full-time take home earnings.

Of course these declarations about a given level of rent being affordable or unaffordable are nonsense. Any figure will be affordable to some but not to others.

Where I agree with Shelter is that it would be desirable to increase the supply of private rented accommodation to reduce rents.

Shelter says:

Shelter is now calling on the government to take urgent action to stabilise the rental market and to develop policies to bring rents more in line with average earnings.

What should the Government actually do? One of the most effective ways to increase supply would be to increase the tax relief on the Rent a Room scheme. This gives tax relief on the first £4,250 a year in rent. But during the 13 wasted years of Labour misrule this allowance was left unchanged. Thus, as rents increased, its real value was eroded.

The Raise the Roof Campaign is calling for it to be raised to £9,000.

Shelter says:

"Raising the threshold to £9,000 is just common sense – it would remove barriers to the provision of much needed low cost rental accommodation and would help those struggling with mortgage costs."

The campaign is also backed by the National Landlords Association.

I think this measure would result in a reduction in the £21 billion annual Housing Benefits bill. One problem with rent (and thus the Housing Benefit that often pays it) being so high is that people are worse off working. So boosting this tax break to increase the housing supply would help reduce unemployment. Not only by making it more attractive to get off benefits but also by improving mobility of labour.