Propertymark has called on the Welsh Government to think differently from the UK Government and keep Land Transaction Tax (LTT) relief for multiple dwellings as well as maintaining the 6-dwelling rule. Now that the relief is not available in England, the Welsh private rented sector (PRS) could appear more attractive to investors and Ministers should consider other policy approaches to encourage this.
The UK Government announced in the Spring Budget 2024 that Multiple Dwelling Relief (MDR) for Stamp Duty Land Tax (SDLT) will be abolished in England and Northern Ireland from 1 June 2024, which will result in a reduction to the Welsh Block Grant estimated to be up to £8 million a year. The Welsh Government anticipates that the abolition of LTT MDR would broadly offset this loss of funding to the block grant.
We challenge the assumption that this measure will compensate for the drop in the Block Grant. Conversely, we are concerned that a resultant loss of housing supply will disproportionately affect low-wage and vulnerable people and lead to rising costs for homelessness support.
Instead, we urge the Welsh Government to consider other policy initiatives that could capitalise on the divergence of the tax regimes in England and Wales to draw investment into the housing sector.
To further stimulate supply at this critical time during a shortage of accommodation we also believe the 6-dwelling rule should remain.
Research from Alma Economics found that landlords with larger portfolios own 30% of the total housing stock in Cardiff and 25% in Swansea. These are two areas where affordable housing options are at the most critical level, so any policy that could further constrict investment and supply in the PRS is especially concerning.
Our position paper on the impact of tax changes on the PRS calls on the UK Government and the devolved nations to review all property taxes on landlords.
Perhaps the biggest impact on the supply of homes in the PRS is the UK Government’s decision to phase out Mortgage Interest Relief and other tax deductibles as part of Section 24 of the Finance Act 2015.
While the majority of tax levers continue to be within the competence of the UK Government, we strongly recommend that the Welsh Government reduces the higher rates of LTT on residential property to stimulate increased investment and calls for a reversal of the phasing out of Mortgage Interest Relief.
Source: Propertymark.