鈥淎bolition of Multiple Dwellings Relief will wipe millions off BTR balance sheets鈥�
Brendan Geraghty, CEO of the ARL (黑料专区), the membership association and representative body for the Build to Rent sector, incorporating urban and suburban Build to Rent, comments:
鈥淲hilst the Chancellor stated that the removal of Multiple Dwellings Relief (MDR) for stamp duty land tax, as of 1 June 2024, is aimed at stopping its abuse by private individuals there is no doubt that news of the removal, announced in the Spring Budget yesterday, could have significant impact on the balance sheets of Build to Rent (BTR) developments, especially in the regions, and will act as a disincentive to future investment in BTR.
鈥淢DR was introduced in 2011 to 鈥渞educe a potential barrier to investment in residential property and promote private rented sector housing supply鈥�. Whilst the Chancellor stated there is insufficient evidence that MDR has promoted investment, an external evaluation of MDR carried out as part of HMRC鈥檚 Tax Reliefs Evaluation Programme and published in 2021, revealed that for businesses, such as Build to Rent investors, 60% said the availability of MDR had at least some influence on their decision to purchase dwellings, with 30% saying it had an important or very important influence.
鈥淚n removing MDR the Government states that 鈥渙nly businesses purchasing multiple dwellings in a single or linked transactions will be impacted鈥�. However, according to ARL members, some 拢40 billion has been invested in BTR in the UK over the last ten years and this announcement has wiped between 拢400-800 million off the current valuations with one fell swoop.
鈥淭he removal of MDR will also impact forward funds and forward commits in future 鈥� either the ability to compete for land or for developers who would have had the benefit of the additional pricing, further straining the current market.
鈥淎t a time when the Government states the need for increased delivery of new homes, this news is another example of putting additional barriers to future BTR development which can deliver much needed, good quality, professionally managed homes at pace. The BTR sector has already delivered 100,300 completed homes yet the demand within the PRS sector is thought to be up to 1 million homes by 2031, according to Savills. The ARL therefore argues that BTR schemes delivered at scale should continue to receive MDR to encourage future investment.鈥�