Budget 2024: Housing sector sounds alarm over build to rent tax hike

The housing sector has hit out at the chancellor’s decision to abolish a targeted tax incentive originally designed to boost institutional investment in housing and the build to rent sector.

Chancellor Jeremy Hunt styled his Spring Budget as a tax-cutting intervention, however he surprised property industry observers by announcing the abolition of Multiple Dwellings Relief on stamp duty – which applies when buyers make bulk house purchases.

The relief, which zero-rated bulk acquisitions, made purchases by investors of build to rent properties more affordable.

Melanie Leech, chief executive of the British Property Federation, said: “Abolishing SDLT multiple dwellings relief will hit the build to rent sector at a time when the government should be doing everything in its power to encourage more long-term investment into professionally managed rental homes. This will hinder rather than stimulate the efficiency of the housing market.”

Hunt said the abolition of the Multiple Dwellings Relief, which was in part designed to support the growth of the build to rent sector, followed an external evaluation “which showed no strong evidence the relief is meeting its original objectives of supporting investment in the private rented sector”.

However, Henry Moss, partner at law firm Ashurst said: “The axing of Multiple Dwellings Relief is an unexpected blow to institutional investment in high quality rental housing. I’m surprised, as this contradicts the government’s professed wish to increase investment in new housing.”

Savills noted that the announcement came alongside a separate announcement of a reduction in the rate of capital gains paid by landlords and second-home owners on home sales, which might stimulate some landlords to consider exiting the sector.

Lucian Cook, head of residential research at Savills, said: “Today’s budget has bigger implications for private landlords and second homeowners than current and aspiring homeowners.

“The abolition of multiple dwellings relief is likely to temper investment among landlords, while the targeted cut in capital gains tax on residential properties may tip the balance for a few landlords who have questioned their ongoing investment in the sector.”

As well as the tax changes, Hunt’s budget contained announcements of investment to unblock major housing schemes in London, develop plans for homes in Cambridge and Leeds, and more assistance to restart schemes affected by the nutrient neutrality crisis. But there was no new scheme to help first time buyers, affected by higher interest rates and the closure of the Help to Buy scheme, into the market.

Cook added that the bigger omission in the budget was any help for first-time buyers. “It won’t do much for rental supply, but neither will it necessarily make it substantially easier for people to get on the housing ladder,” he said.

This point was echoed by Peter Hardy, partner and co-head of living at law firm Addleshaw Goddard, who said the abolition of multiple dwellings relief would have “an adverse effect on the build-to-rent sector” and add “a punitive tax” to build to rent housing.

He added: “It is unfortunate that when housing is, for once, high on everyone’s political agenda the only meaningful change is to increase costs not lower them. [There was] nothing on affordable housing, nothing to help ordinary buyers of homes [and] nothing to encourage further investment in building new homes by anyone. An altogether disappointing budget for the industry.”

Mark Washer, chief executive of housing association SNG, said the failure to announce more radical measures to address the housing crisis, particularly that of children living in temporary accommodation was “a massive missed opportunity”.

He said: “Whoever delivers the next budget must stop the tinkering and treat housing as national infrastructure that can deliver a huge productivity, health, and wellbeing boost to lift the whole country over the term of the next parliament with a legacy lasting generations.”

The BPF’s Leech overall welcomed Hunt’s separate announcement of a limited number of devolution deals and specific housing investments, but said the announcement fell “far short of a bold strategy for delivering the homes needed across the country”, and gave the property sector “little to cheer about”.