The British Property Federation has proposed a 15-home threshold to define institutional investment in the buy-to-let sector which would be exempt from the proposed higher rate of stamp duty land tax.
Chancellor George Osborne announced a 3% surcharge for buy-to-let landlords on each stamp duty band in the Autumn Statement.
The government has said it would consider whether or not an exemption from the surcharge should be introduced for large-scale investors. But it has not yet guaranteed there will be an exemption for commercial property investors; nor has it explained how the exemption would work in practice.
The BPF has warned that the higher rate of tax could slow investment in the build-to-rent sector, which currently has 30,000 homes with planning permission in the UK – a 47% increase since October, when there were 21,000 units with permission.
Since the start of the year, there has been a flurry of announcements around investment in the build-to-rent sector, on a level which the BPF said was unprecedented.
Grainger pledged to invest £850m in the private rented sector by 2020; Legal & General announced it was working with Dutch pension fund PGGM to deliver a £600m build-to-rent investment plan; and RBS pledged £1bn to lend to the build-to-rent sector.
The market confidence follows growth in the sector since 2011, when changes to SDLT rules were brought in offering relief to bulk purchasers of residential property for investment and letting.
However, Andrew Stanford, UK residential fund manager at LaSalle Investment Management and chair of the BPF’s built-to-rent committee, said a 3% surcharge on large-scale investments would have a “significant negative impact” on LaSalle’s ability to invest in the sector.
The BPF is supporting a recommendation that build-to-rent investments of 15 homes or more would be exempt from the surcharge.
Harry Downes, managing director at PRS operator FizzyLiving, said: “The professional private rented sector has the skill, experience, commitment and funding to make a substantial contribution to the government’s housing target, and the 15-unit exemption recommendation will ensure that professional management standards remain viable.”
Adam Challis, head of residential research at JLL, said a surcharge on large-scale investors would undermine a “once-in-a-generation opportunity” to give renters a better deal.
• To send feedback e-mail louisa.clarence-smith@estatesgazette.com or tweet @LouisaClarence or @estatesgazette
