Large investment in BTR should be exempt from SDLT

In yet another contest against the increase of Stamp Duty for buy-to-let and second properties from April, the industry is calling on the Government to protect larger scale investment.

The British Property Federation (BPF) wants higher scale investment in residential homes protected from the tax hike. The firm argues that unless this type of investment is protected, the industry is at risk of losing much-needed funding.

Warning

In its warning to the sector, the BPF said that the higher rate of tax could cancel out the progress made by the build to rent sector since 2011. New data indicates that there are over 30,000 build to rent units with planning permission in Britain, representing a 47% increase since October.

Additionally, the BPF noted that since the beginning of 2016, there have been significant investments made in the sector. These include Grainger PLC, which pledged to invest £850m by 2020.

Further high-scale investors include Legal and General, working alongside Dutch pension fund PGGM to deliver a £600m build to rent investment plan. Greystar Europe Holdings, one of the largest housing investors in the United States, has announced the acquisition of a 26.5 acre plot in Greenford, West London. What’s more, the Royal Bank of Scotland has pledged £1bn in lending for the build to rent sector.

Large investment in BTR should be exempt from SDLT

Exemption

The BFP has called for the introduction of an easy portfolio test that will exempt institutional investors with 15 or more units in their portfolio from paying the extra tax.

‘Since the start of the year, there has been investment in the build to rent sector on a scale that we have never seen before,’ noted Melanie Leech, chief executive of the BPF. ‘Following the changes that were made to SDLT a few years ago, investment in the sector has really taken off and it is great to see pension funds and other institutions now investing heavily in housing.’[1]

‘There is cross-party support for new housing and a better quality rented sector and we would expect the Government to recognise the impact that the SDLT surcharge might have on investment in new homes and the creation of a better quality rental product,’ she continued.[1]

Negative impact

If an exemption is not provided, there would be a significant negative impact on the sector, according to Andrew Stanford, UK residential fund manager at LaSalle Investment Management and chair of the BPF’s Build to Rent committee.

‘We were encouraged by the proposed exemption for large scale investors from the additional 3% SDLT,’ Stanford observed. ‘If the exemption was not implemented it would have a significant negative impact on our ability to invest in the nascent build to rent sector.’[1]

‘LaSalle intends to provide good quality, built to rent homes across the country for customers on their journey to home ownership or for customers who want the flexibility and security of renting a home with a long term institutional landlord,’ he added.[1]

Adam Challis, head of residential research at JLL, feels that the build to rent sector has a real opportunity to increase the quantity and quality of private rented properties. He noted that, ‘the 3% SDLT charge would undermine this once in a generation opportunity to give renters a better deal.’[1]

[1] http://www.propertywire.com/news/europe/uk-build-rent-tax-2016020811530.html