Tax payers to save £1,267,000 a year if MPs forced to rent

Taxpayers are set to save over a million pounds a year if MPs and Lords are forced to rent accommodation near the Palace of Westminster rather than buy second homes in the capital, according to Smartlandlord.co.uk.

In response to public fury over second-homes, Tory Party Leader David Cameron has said his MPs will only be allowed to rent second-homes rather than buy. Nick Clegg, leader of the Liberal Democrats has said the only long-term solution with second-home expenses is to bar MPs from buying or selling properties at all.

Should their proposals be adopted more widely, taxpayers will benefit - even without dodgy claims form MPS pushing up expenses. The average rent for a studio flat in Westminster is £1,378 a month. But assuming an interest-only mortgage at 4.2%, on a purchase price of £538,404 at 75% LTV (and mortgage fees of £1,000 amortised over two years) renting costs approximately £177 less than buying. With 1,372 tenants to pay for, taxpayers will end up saving approximately £1,267,399 every year on housing allowances alone.

Keshav Thukaram, managing director of Smartlandlord.co.uk, says: "This is obviously good news for taxpayers who will save as a result of this move. The saving should be even larger assuming parliamentarians have less scope to charge for renovations or flipping. And some MPs can rent in cheaper Lambeth - but we're not counting on that."

Although the flood of MPs and Lords looking to rent property in Westminster will be good news for taxpayers, it will be bad news for local tenants. Smartlandlord.co.uk says rents in Westminster are set to rise significantly as MPs and Lords pile out of the second-home market and into rented accommodation. There are only 29,000 privately rented homes in Westminster, and Smartlandlord.co.uk says the low level of housing stock will not be able to accommodate an influx of 1,372 MPs and Lords.

Keshav Thukaram says: "With 646 MPs and 726 Lords looking for rental properties, we're going to see a dramatic increase on rents in the local area. It's a question of supply and demand. If demand suddenly goes up and supply is stagnant, market forces will push up prices. I'd say a 5% increase on the average rental bill is about right. The increases in rents should be good news for local landlords. But the truth is that very few of us would like MPs in our properties."