New Buy-To-Let Rules Will Hurt Economy: MPs

George Osborne's plans to curb the buy-to-let market will come at a cost to the wider economy as they drive rents higher, according to MPs (BSE: MPSLTD.BO - news) .

The Chancellor announced in his autumn statement in November that he was to add a 3% surcharge on stamp duty for buy-to-let landlords.

Policy makers see the rapid expansion in this sector as a potential threat to financial stability because of the risks it could pose in the event of a wider economic slump.

But Mr Osborne's plans to curb buy-to-let have already been criticised amid claims they will result in higher rents.

Now (Other OTC: NWPN - news) the Commons Treasury Select Committee has said there will be a wider economic impact from the changes.

In its report on the autumn statement, the committee said: "Access to a well-functioning, affordable housing market, including for private rented properties, has been widely recognised to be crucial to labour mobility, and hence the overall efficiency of the labour market.

"Labour, Conservative and Coalition governments have for decades recognised the crucial importance of maintaining confidence in the buy-to-let sector."

It said previous "heavy-handed regulatory interventions" in the 1950s and 1960s had resulted in "damaging, unintended consequences".

Committee chairman Andrew Tyrie said: "The measures taken to curb buy-to-let will come at a cost, not only for those who will now face higher rents, but for the wider economy.

"A failure to ensure that individuals have access to a well-functioning, affordable rental market will inhibit labour mobility and reduce economic activity.

"The Chancellor's attempts to resolve what he calls a 'home ownership crisis' should not come at the expense of the private rented sector.

"Housing policy in the UK has been in a mess for a long time – caused by the policies of successive governments over decades and, often, their unintended consequences.

"Sooner or later, more thoroughgoing reform will be essential."

It comes as new figures show first-time buyers joining the property market this year will have already spent on average £52,900 on rent.

The report by the Association of Residential Letting Agents says the figure will hit £64,400 for those starting to rent now – meaning some people will never be able to afford their own place.