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Real estate groups are lobbying the Treasury to row back on changes to property taxation in England that would see investors in rental housing pay more tax on deals.
The British Property Federation industry group has written to chancellor Jeremy Hunt, pressing him to alter plans announced in the March Budget to abolish multiple dwelling relief on stamp duty that are due to come into effect in June.
The relief means buyers can pay less transaction tax when purchasing more than one dwelling in a single deal.
The policy was introduced by the coalition government in 2011 to boost investment in private rental homes. But in his Budget speech Hunt said there was “no strong evidence that it had done so”, and added it was being “regularly abused”.
The English rental market is dominated by small landlords, and tenants have faced record rent increases over the past year. The government has been encouraging institutional investors to put money into building and owning rental homes, including student and retirement housing, to help increase supply and bring down prices.
Abolishing the relief will raise £290mn for the exchequer over the next three years, according to official estimates.
The federation argued that the government has misjudged the impact of the tax changes, and said that ending the relief will have the “unintended consequence” of discouraging thousands of homes from being built.
“The abolition . . . will result in fewer new homes being built and a drop in both domestic and overseas investment into UK housing delivery,” the BPF said in the letter to Hunt, which was co-signed by several dozen real estate companies and investors including housebuilder MJ Gleeson, asset manager Invesco and rental landlord Grainger.
They asked the Treasury to create a carve out that would maintain the tax breaks for “large-scale residential property acquisitions”.
The Treasury said the decision to abolish the relief came after an external evaluation revealed “a high number of abusive claims” and found that 51 per cent of claims for relief were made by private individuals in relation to properties for personal use only.
But in their letter, the property groups maintained the analysis “missed the larger and more significant point of just how important it is to be able to plan development on the basis that [relief] will be available in the future”.
Jason Hardman, executive director of residential valuations at property adviser CBRE, said the changes were “already having an impact” and could make some building projects unviable. He suggested the relief could be changed to only apply to purchases of more than 25 units.
FTSE 100 student housing group Unite last week reported that independent valuers had cut the value of its £2.9bn UK Student Accommodation Fund by 2 per cent because of the planned changes to multiple dwelling relief.
The property groups said the changes have an immediate impact because the tax that a buyer would have to pay on an eventual property sale factors into their current valuations and plans for development and investment.
The Treasury said: “We continue to engage with the build to rent sector to understand concerns.”
