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Abolition of Multiple Dwellings Relief (MDR) Raises Concerns

Published by Chirag
Published Date: April 29, 2024

A coalition of property developers and tenant representatives has penned a letter to the Chancellor, expressing grave concerns regarding the upcoming Multiple Dwellings Relief (MDR) abolition. This tax break, set to be discontinued on 1 June 2024, was deemed unproductive and prone to abuse, prompting its removal by Chancellor Jeremy Hunt following an external evaluation.

The Impact of MDR Abolition on the Build-to-Rent Sector

The British Property Foundation (BPF) and the UK Single Family Association (UK SFA), among others, caution that the elimination of MDR could dissuade developers at a time when housing demand in the UK is soaring, labelling the decision as potentially counterproductive.

MDR abolition

Of particular concern is the impact on the build-to-rent sector, which has seen substantial investment totalling £40 billion since MDR's inception in 2011. With over 100,000 homes completed and many more in various stages of planning and construction, the sector has witnessed significant growth, particularly in areas outside of London and the southeast.

The letter, signed by over 30 organisations, underscores the pivotal role of MDR in supporting long-term capital value for rental properties, thereby bolstering development viability and attracting vital investment. The coalition warns that the removal of MDR could lead to the construction of 13,000 to 25,000 fewer homes and result in the loss of up to 60,000 construction jobs.

Urging Reconsideration: Preserving MDR for Residential Property Acquisitions

The British Property Foundation contends that retaining MDR for large-scale residential property acquisitions, typical of build-to-rent and purpose-built student accommodation, is essential for sustaining future homebuilding efforts across the country.

MDR abolition

Critics argue that the abolition of MDR is poised to stifle housing construction, diminish both domestic and overseas investment, and disproportionately impact poor regions. While the government anticipates revenue gains from the removal of MDR, industry experts warn of the far-reaching consequences on housing supply and affordability.

Ian Fletcher, Director of Policy at the British Property Federation, urges the government to reconsider its decision, emphasising the critical role of the tax system in fostering new rental home construction and addressing the UK's housing shortage.

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