Stamp Duty Reforms Trigger Alarm Over Potential Housing and Job Losses

The UK housing market braces for more upheaval following Chancellor Jeremy Hunt’s announcement to abolish Multiple Dwellings Relief (MDR), a move experts fear could hinder the construction of up to 25,000 homes and put 60,000 jobs at risk.

Property experts are sounding the alarm that the removal of MDR in Stamp Duty Land Tax (SDLT) could prevent the construction of between 13,000 and 25,000 homes, thereby jeopardising up to 60,000 related jobs. This reform is part of a broader attempt by the Treasury to boost revenue—an expected increase of £385 million annually by 2028-29—but may paradoxically stifle growth in the housing sector, already strained under a persistent affordability crisis.

Changes in Stamp Duty Costs
The reform means significant changes in how property investments are taxed. David Hannah, Group Chairman of Cornerstone Tax, illustrated the new financial burdens facing property buyers. “Currently, a property buyer purchasing three apartments from a developer at £350,000 each would have to pay £46,500 in tax. Post-reform, the tax jumps to £77,750 unless the investor buys six or more units to qualify for a reduced rate,” Hannah explains. This change not only raises the costs for smaller investors but also encourages the formation of buying groups to avoid higher tax rates.

Criticism of Government Strategy
David Hannah criticises the government’s approach as short-sighted, particularly at a time when affordable housing is in critical demand. “Multiple Dwellings Relief was first implemented as a means to incentivise bulk purchases and provided developers with a suitable avenue for delivering low-cost homes,” Hannah noted. He argues that the government should be introducing new incentives for developers rather than scrapping existing ones. The increase in tax from 1-2% to 5% for developers is seen as a major deterrent that could lead to project cancellations and increased property prices, as supply fails to meet the surging demand for affordable housing.

Hannah also suggests alternative reforms that could have been considered, such as abolishing the second home surcharge from rental sector investors and reinstating full relief on mortgage interest payments. These measures could have reduced purchase costs and potentially allowed landlords to lower or stabilise rents, providing relief to the private rental sector.

As these changes unfold, the construction sector and potential homeowners alike watch anxiously, hoping for adjustments or new measures that might alleviate these emerging challenges in the UK housing market.