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The government’s response to consultation on reforms to the real estate investment trust (REIT) regime.
The government announced in the Budget on 21 March 2012 that it would undertake a consultation to (1) explore the role the REITs can play in supporting the social housing sector; and (2) whether to change the tax treatment of income received by a REIT when it invests in another REIT.
This announcement follows on from recommendations received during (but outside the scope of) an informal consultation held in spring 2011 to discuss a number of reform measures that would remove barriers to entry and investment for REITs (and which are proposed to come into effect subject to Finance Bill 2012 receiving Royal Assent).
It has been suggested by stakeholders that using the REIT regime to support the creation of a social housing REIT business model (eg a REIT whose property includes social housing) would offer social housing providers an alternative source of financing to fund their future housing developments. The government considered this proposal and decided that a joint consultation be held by HM Treasury (which leads on REIT policy) and the Department for Communities and Local Government (which leads on social housing policy in England) to explore the role the REIT regime can play in social housing.
For REITs investing in REITs, it was proposed that amending the tax treatment of income from such activity would facilitate investment diversification opportunities for REIT investors. Again, the proposal was considered and the government decided to consult further on the associated benefits and risks.
The government was interested in hearing from all stakeholders who have a view as to whether a social housing REIT could address the existing constraints and help support social housing providers’ development plans. The government was also interested in views on potential technical REIT regime changes to facilitate REITs investing in REITs.