9:17 AM, 5th December 2024, About a month ago
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In a blow to Scotland’s landlords, the Scottish Budget has raised the Additional Dwelling Supplement (ADS) from 6% to 8%.
The ADS, introduced in April 2016, applies to transactions involving the purchase of an additional residential dwelling over £40,000, including buy-to-let investments and second homes.
The Scottish government also made a U-turn by increasing funding for affordable homes in the Scottish Budget.
In the Scottish Budget document, it says: “The Additional Dwelling Supplement (ADS) will increase from 6% to 8% with effect from 5 December 2024. This increase will not, however, apply to transactions for which legal missives have been signed on or before 4 December.”
The SFC forecast that this increase will raise £32m in additional revenue in 2025-26. The increased rate also supports the Scottish government’s commitment to protect opportunities for first-time buyers in Scotland.”
John Blackwood, the chief executive of the Scottish Association of Landlords (SAL), said: “Despite the Scottish Government admitting Scotland is in the midst of a housing emergency, they have decided to deal another blow to landlord investors by increasing the Additional Dwelling Supplement (ADS) from 6% to 8%.
“Instead of encouraging new investment, they seem to be going out of their way to deter new investors from buying from the many landlords who have had enough and are opting to sell.
“In the recent Autumn Budget, the UK Government decided to increase a similar tax south of the border.”
He added: “The private rented sector is vital to Scotland’s housing system in providing much needed homes to rent.
“By following suit, the Scottish Government is signalling clearly to the market they are not interested in new investment in Scotland.”
Timothy Douglas, head of policy and campaigns at Propertymark, slammed the Scottish government for increasing the ADS, arguing it will discourage new landlords from entering the market and exacerbate the housing crisis.
He said: “With huge demand for private rented property and long-term rent control measures contained in the Housing Bill, the Scottish government’s decision to raise Additional Dwelling Supplement under Land and Buildings Transaction Tax from six to eight per cent is quite simply wrong and out of touch with the housing needs of Scotland.
“The decision leaves Scotland as the most expensive place in the UK to rent out a property and will further discourage new landlords to take on much needed private rented property to let.”
He adds the SNP’s policies will end up ultimately hurting tenants as landlords leave the market.
He said: “Whilst Propertymark has long called for a review of Land and Buildings Transaction Tax, and the Scottish government has now committed to do this through the Budget, ultimately with between tenancy rent caps planned and impending minimum energy efficiency rules for private rented property, raising yet more taxes on the private rented sector will do nothing to tackle the housing emergency and only raise rents further and put the burden of these costs on tenants.”
Last year, the SNP government announced a £200 million cut to the affordable housing budget, which was widely criticised by housing organisations as “a mistake”.
However, the Scottish budget has pledged to boost funding for the housing sector to address Scotland’s housing crisis.
Shona Robinson, the Finance Secretary, said: “We recognise also that having a warm, safe and affordable place to live is critical to tackling child poverty.
“Given the scale of the housing challenge, I will look at all the levers available to me to deliver.”
The budget will increase social security benefits by nearly £800 million in 2025-26 to keep up with inflation.
Ms Robinson says the Scottish government will “ramp up” its investment in housing, with £768 million going towards affordable homes, helping to build or acquire over 8,000 new properties for social rent, mid-market rent, and low-cost homeownership next year.
Alison Watson, director of Shelter Scotland, says the housing charity welcomes the Scottish government’s acknowledgement that last year’s cut to the affordable housing budget was a mistake.
She said: “The reversal of the cuts to housing and investment in local services are welcome. Now it is time for a step change in how the Scottish government tackles Scotland’s housing emergency and the pace at which it does so.
“Of course, we accept the reality of budget pressures but if the Scottish government wants to be taken seriously when it tells us it’s still committed to tackling child poverty then it needs to prove it is serious about ending child homelessness.
“That means showing that today’s cash can deliver change for the more than 10,000 children who will wake up facing homelessness this Christmas Day – the highest number on record and more than double the figure from a decade ago.
“Building more social homes is the only way to end the housing emergency, and the government knows this.
“Investment in social housing is investment in the people of Scotland, and generations to come.”
Places for People’s chief executive Greg Reed said: “The £768m investment in affordable housing turns a new page for Scotland, where a worsening crisis sees every twentieth person awaiting a social home and where 10,000 children are stuck in temporary accommodation.
“The Finance Secretary’s injection into the Affordable Housing Supply Programme – reversing the devastating 2023 cuts to the budget – will pave the road to recovery for housing in Scotland and urgently kick-start the supply of 8,000 vital new affordable homes.
“However while this funding is welcome, this is just the start. A long-term and strategic approach is the only way to truly end Scotland’s housing emergency, reduce homelessness and eradicate child poverty. We welcome the Finance Secretary’s pledge to look at all the levers available to her to achieve this.
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