The Welsh government has been warned it risks reducing the supply of student accommodation if changes to tax reliefs are introduced.

Its consultation report into Land Transaction Tax (LTT) – similar to Stamp Duty Land Tax - including a plan to abolish Multiple Dwellings Relief (MDR) and abolish LTT relief on the purchase of six or more dwellings in a single transaction, reveals respondents believe it might act as a deterrent strong enough to effectively reduce housing supply and negatively impact the Welsh economy.

Declines

“Some felt that abolishing MDR would disincentivise investment in property rental sectors, which could lead to declines in housing supply and the wider Welsh economy,” says the report. “Some emphasised the importance to housing supply of sectors which benefitted from LTT MDR, such as the private rented sector, the purpose-built student sector and the build-to-rent sector.”

Points in favour of abolition included increased revenues, tax simplification and the possibility of empowering individual taxpayers to buy their own homes rather than rent.

Transactions

There were a total of 59,560 transactions for LTT from April 2022 to March 2023, which pocketed the Welsh Revenue Authority £287 million. This included £92 million additional revenue raised from higher rates, an increase of 50% on the previous year.

Propertymark has previously called for the government to reduce levels of Land Transaction Tax for landlords’ properties as a way to stimulate the supply of affordable homes in the PRS.

The Welsh government says it will continue to assess the potential impacts and may hold further discussions before making a decision, which is a high priority.

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