EDITOR’S COMMENT I am often confused by politicians. Their thought processes and decision-making practices leave me baffled more often than not. Particularly when it comes to the world of residential.
There is a constant toing and froing between wanting to build and support a professional rented sector and enabling everyone to be able to own a home – the message of “hey, not everyone needs to be a homeowner, long-term renting is where it’s at”, switching to “the property-owning democracy is one of the foundations of our country… we shouldn’t accept that homeownership should be reserved only for the lucky few,” as uttered by Robert Jenrick just this week. Confusing.
Maybe it’s not me that is confused, but the politicians. That would go some way to explaining why the Treasury wants its residential property developer levy to apply to the build-to-rent and student housing sectors as well as the mainstream housebuilding community.
The purported purpose of the tax is to raise money to help fix the shambles that is the cladding scandal. That, I support – but like many property taxes, government hasn’t really thought it through. Like its entire approach to the real estate sector, it hasn’t taken the time to properly understand how the industry works, how all the subdivisions of this exciting business functions. It just sees potential pound signs and goes after them without understanding the potential consequences.
The resi devi levy could, say a host of BTR specialists and the British Property Federation, stymie the massive potential of the build-to-rent sector. BTR was one of just a handful of asset classes that continued to grow during the pandemic. As EG’s first BTR report revealed, investment in the sector doubled in the 12 months to March 2021, with almost £5bn of assets traded. Add to that the £11bn of assets in various stages of development and it is clear to see just how booming this sector could – and should – be.
The BPF wants government to reconsider the tax and exempt both BTR developments and purpose-built student accommodation from it.
“As the tax has been designed with traditional volume build-to-sell trading business models in mind, as proposed it will have a penal impact on the rental sector – particularly in light of the proposals to impose a dry tax charge where a building isn’t even sold,” writes the BPF in response to government’s consultation on the new tax. “These proposals will disproportionately impact on the viability of new high-quality, professionally managed rental homes in the UK. Everyone would like to see more homes built, but this tax really works against that.”
The BPF goes further, saying levying the tax on BTR and PBSA will counter the government’s levelling-up agenda. The majority of BTR and student schemes are developed in towns and cities, bringing life back into places that have been decimated by Covid. Curtailing this investment is counter-intuitive, they say.
I have to agree. We all know there’s a gaping hole in the UK budget that is going to need to be plugged. New taxes and tax rises will do that. But surely, after the past 15 months, government has to have learnt just a little about unintended consequences of actions that are not properly investigated before implementation – right?
Here’s hoping that following the close of the consultation on the RPDT on 22 July, the Treasury, Jenrick and his team will take a little time to truly understand how real estate really works and that the BTR sector makes its voice heard.
To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews
