Chancellor urged to retain tax relief for multiple dwellings

The British Property Federation is among 40 real estate groups calling on the government to reverse plans to abolish multiple dwelling relief on stamp duty from June onwards. Representatives for the rental housing sector have written to chancellor Jeremy Hunt, the chancellor, about the policy, which was set out in the Spring Budget earlier this year.  In the letter, seen by EG, representatives argue that axeing the relief will result in fewer new homes being built and a drop in both domestic and overseas investment into UK housing delivery. MDR was introduced in 2011 to boost investment into the UK BTR and PRS sectors. Hunt said the tax break had been intended to support investment into the private rented sector but was being regularly abused. The letter’s signatories said: “MDR was specifically created to level the playing field of large-scale residential investment in SDLT terms when compared to an individual investor buying a single property to rent out. “It is less of a ‘relief’ than an equalisation of treatment as between large and small-scale property owners.” The sector estimated that the number of homes foregone because of scrapping MDR could be between 13,000 and 25,000. The letter went on to say that new-build BTR and student accommodation developments are appraised based on the value for which they could be sold upon completion, with that value reflecting all costs a purchaser would pay, including SDLT. Therefore, MDR has boosted BTR and PBSA by allowing new schemes to be appraised based on a lower rate of SDLT than the commercial property rate that would generally apply in the absence of MDR.  Representatives added that the abolition will increase the tax burden on building new rental homes, which will hurt viability through lower assumed sale values in investment calculations. Moreover, developments in areas with lower property values would be disproportionately affected. Where MDR would have previously benefited development in less economically successful areas that otherwise may not attract private investment, such as regeneration areas, the loss of MDR is predicted to stretch viability even further, making developments in those areas less attractive than higher property value areas. Signatories also expect the removal of MDR to disproportionately affect the availability of lower-value affordable rental housing in London and the South East, where the relief has made a substantial contribution to development viability. In addition, losing MDR will mean that new rental home developments can only support a lower section 106 affordable housing contribution, resulting in a double hit to the development of such badly needed homes. The letter concluded: “It is not too late to avoid these unintended consequences and the loss of new homes they entail. Retaining MDR for large-scale residential property acquisitions typical of BTR and PBSA would support future home building across the country – not just the delivery of rental homes but also the affordable and for-sale homes that they facilitate.” Image © James Veysey/Shutterstock