The property industry reacted with dismay today after the Treasury ruled out making vital tax changes to boost the UKâ€™s supply of homes to rent.
Leading the criticism of â€œshortsighted ministersâ€, the British Property Federation (BPF) said they have missed â€œa real opportunityâ€ to support the sector and in doing so ease the UKâ€™s housing crisis, create new jobs and reduce the budget deficit.
The BPF spokeout after yesterdayâ€™s Treasury response to a consultation launched by the previous government, â€œInvestment in the Private Rented Sectorâ€, which was intended to unlock new sources of capital for house building in the face of constrained bank lending and falling public spending.
The Treasury rejected proposals to change VAT and reform Stamp Duty Land Tax (SDLT) on the bulk purchase of housing, which has been a big stumbling block for institutional investors. The only concession was a pledge to consider the case for changes to rules governing residential real estate investment trusts to reduce barriers to entry.
In seeking to justify its response, however, the Treasury claimed that institutional investment would remain a â€œnicheâ€ part of the private rented sector.
BPF policy director Ian Fletcher declared: â€œThere is a huge hole in the Treasuryâ€™s logic – on the one hand arguing that any change to the SDLT regime would â€˜carry a significant cost to the Exchequerâ€™, but on the other hand that this is a â€˜nicheâ€™ sector and that nothing would happen. They canâ€™t argue it both ways.â€
Andrew Cunningham, chief executive of leading residential landlord Grainger, said the Treasuryâ€™s negative response was â€œprobably not too surprisingâ€. But he added: â€œIt is encouraging that the government intends to explore changes to the real estate regime to allow for residential investment. Residential REITs could encourage greater investment in the private rented sector, which is set to grow as home ownership continues to be squeezed.â€
Chris Lacey, head of residential investment at CB Richard Ellis, said: â€œThe government has not really signalled to the residential property industry that they are committed to the private rented sector. We welcome further review of the REIT regime to reduce barriers to entry, but all other support has been effectively ruled out.â€