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Property groups are pressing the Treasury to reverse changes to property taxes in England that would see investors in rented homes pay more tax on deals.
The UK Property Federation industry group has written to Chancellor Jeremy Hunt, pressing him to change plans announced in the March budget to scrap the stamp duty exemption for multiple dwellings that are due to come into force in June.
This relief means that buyers can pay less transaction tax when purchasing more than one residence in a single transaction.
The policy was introduced by the coalition government in 2011 to boost investment in private rented homes. But Hunt said in his budget speech that there was “no solid evidence that it did” and added that it was “regularly abused”.
The English rental market is dominated by small landlords, and tenants have faced record rent increases over the past year. The government is encouraging institutional investors to invest money in building and owning homes for rent, including student and retirement accommodation, to help increase supply and drive down prices.
Removing the subsidy would raise £290m for the Treasury over the next three years, according to official estimates.
The federation said the government had misjudged the impact of the tax changes, and said ending the exemption would have the “unintended consequence” of discouraging thousands of homes from building.
“Cancellation… will result in fewer new homes being built and reduced domestic and overseas investment in delivering UK housing.” Asset manager Invesco and tenant landlord Grainger.
They asked the Treasury Department to create a deduction that would preserve tax breaks for “large-scale residential real estate acquisitions.”
The Treasury said the decision to revoke the exemption came after an external assessment revealed a “large number of abusive claims” and found that 51 per cent of exemption claims were made by private individuals in relation to property for personal use only.
But in their letter, the real estate groups maintained the analysis “misses the larger and more important point of how important it is to be able to plan development on the basis that [relief] It will be available in the future.”
Jason Hardman, executive director of residential valuations at property consultancy CBRE, said the changes were “already having an impact” and could make some building projects unviable. He proposed changing the exemption so that it only applies to purchases of more than 25 units.
FTSE 100 student housing group Unite reported last week that independent valuers had cut the value of the UK's £2.9bn student accommodation fund by 2 per cent due to planned changes to multi-housing relief.
The real estate groups said the changes have an immediate impact because the tax the buyer will have to pay on the eventual sale of the property affects their current valuations, development and investment plans.
The Treasury said: “We continue to engage with the build-to-rent sector to understand the concerns.”
