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Then, to the extent that a pool of privately-owned rental stock is desirable, increasing the blended cost of capital for landlords (by banning mortgages) is going to make rents even less affordable than they are today, ceteris paribus.
I disagree, the effect of banning mortgages for 2nd homes would be to significantly reduce the value of property because fewer people would be able to afford to buy a 500k house with a 50k deposit. Prices would adjust for that. More tenants would be able to buy a home. There would be fewer tenants paying landlord's mortgages.
I do largely agree with your point though. It requires huge investment in housing to make anything like this work.
Stonehedge
NickCJ
On the flip side, we need people to be able to move flexibly both intra-nationally and internationally depending on their job / education / family circumstances. That necessitates the ability to buy and sell a house with minimal friction (tax or otherwise) and a pool of rental stock (whether publicly or privately owned) that churns quickly enough to absorb demand.
Then, to the extent that a pool of privately-owned rental stock is desirable, increasing the blended cost of capital for landlords (by banning mortgages) is going to make rents even less affordable than they are today, ceteris paribus. I think the second home thing can mostly be dealt with through a holiday let crackdown.