The immediate VAT impact of Autumn Budget 2025 on housing associations was limited, but it included a consultation to explore reforming the VAT rules to incentivise the development of land for social housing. This is potentially positive news for the sector, especially if land sales to housing associations and other social housing developers can be zero-rated.
At present many owners of land, including land that could be used for residential property development, benefit from opting to tax the land because it helps them to recover VAT on their costs. However, the sale of opted land to a housing association can often trigger a significant irrecoverable VAT cost if the housing association intends to develop rental units on the land. There are ways to mitigate this, but they can result in additional irrecoverable VAT elsewhere in the supply chain, which usually increases the price of the land for the housing association. More complex structuring to save the VAT can trigger a stamp duty land tax (SDLT) cost instead. If the land sale to the housing association is zero-rated it should remove these costs, making social housing development more viable and increasing housing supply.