The proposals have been put forward by centre-right think tank Onward. It proposes that existing buy-to-let properties would be eligible for 100% CGT relief if the property is sold to a sitting tenant who has lived there for three years or more.

The gain from this tax relief would be split evenly between the landlord and the tenant, giving the landlord a windfall when they sell and the tenant thousands of pounds towards their mortgage deposit.

Onward proposes that the Treasury should pay for this policy by tightening other tax reliefs for buy-to-let investors, including reducing the private residence relief period from 18 months to six months and abolishing lettings relief of up to £40,000.

The think tank’s modelling estimates that 88,000 households would take up the relief each year, meaning nearly half a million households could benefit over five years. Accounting for multiple-person households, this would support the transition of a million people from the private rented sector into home ownership by 2023.

The average gain per property would be £15,000, meaning the average first time buyer could expect to benefit by £7,500. Because the gain is affected by property prices and their historical growth, this rises substantially in some parts of the country, with the average buying tenant in London receiving £19,500 under the scheme.

If the government wanted to go further to incentivise longer-term tenancies, Onward argues that they could make other allowances, such as wear and tear allowance, conditional on the properties being offered on a tenancy agreement of three years or more. It says the changes could be introduced alongside or instead of the government’s proposed introduction of fixed three-year tenancies for everyone.

Onward report, Make a house a home, is here.

Report by Pat Sweet