Letter to the Chancellor: impact of abolishing MDR on PBSA

A letter has been sent to the Chancellor raising concerns about the abolishment of the Multiple Dwellings Relief (MDR).

London view | BTR News

A letter was recently sent to the Chancellor outlining the significance of the MDR and the key role it played in supporting the UK’s institutionally backed residential private rented sector – including purpose-built student accommodation (PBSA).

Since its abolishment, owners, managers, developers, and representatives of the UK’s £125bn institutionally backed residential rental sector expressed their concerns that the abolition of Stamp Duty Land Tax Multiple Dwellings Relief (SDLT MDR) from June 2024 will result in fewer new homes being built and a drop in both domestic and overseas investment into UK housing delivery.

The letter highlights that amid increased demand for housing, the decision to abolish the essential policy seems counterproductive. Whilst the residential sector umbrellas many alternative living sectors, PBSA will be impacted once the MDR is abolished.

The MDR supports the long-term capital value of rental homes, which is critical to development viability and attracting large-scale investment. Therefore, more homes can and have been built. Lower property values outside of London and the Southeast mean that MDR is especially valuable in parts of the country that the Government is trying to level up.

MDR also allows the development of new schemes to be appraised based on a lower rate of SDLT compared to the commercial property rate. Depending on the type of property and its location, this difference could be up to 4% of the scheme’s final value.

The impact of abolishing MDR on PBSA, according to the letter to the Chancellor:

  • It will increase the tax burden on building new rental homes, so fewer homes will get built as a result. The estimated number of homes foregone could be between 13,000 and 25,000. Building these homes would have supported up to 60,000 jobs.
  • It will impact developments in areas with lower property values disproportionately – the loss of MDR will stretch viability even further, making developments in less economically successful areas less attractive than higher property value areas.
  • It will disproportionately affect the availability of lower-value affordable rental housing in London and the Southeast, where MDR has made a big contribution to development viability.

Retaining MDR for large-scale residential development acquisitions would support future rental, affordable and for sales home building across the country.