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Rented housing: new property

For information on the scheme for Key Housing and the Starter Homes Initiative, see EIM21735.

The assistance for key worker rented housing may take the form, not of a cash rental subsidy but of land provided free or at a discounted price to (usually) a registered social landlord (RSL) or a subsidy for the land purchase or towards the building costs. This subsidy is a contribution towards the cost of the accommodation. Where the amount of the contribution exceeds 拢75,000 there will be a benefit under S106 ITEPA 2003. EIM11480 explains how to calculate the value of this benefit and EIM11483 gives an example.

Where there is more than one person contributing to the costs, only the highest contribution is taken into account. (See EIM11430 for the definition of the person involved in providing the accommodation).

Example: In May 2004, a local authority sells land (which it has owned for a number of years) to RSL for a 40 home key worker rented housing development. At the date of sale the land has a market value of 拢3 million. Since key workers include employees of the local authority the authority sells it for 拢2 million. Building costs to the RSL are 拢4 million and the RSL receives a 拢400,000 grant from Central Government to assist the scheme. Notional gross rateable value (GRV) for each home is 拢1200 per annum (pa) and each employee pays 拢100 per week rent (拢5200 pa).

Answer: The cost of the property is the highest of the amount contributed by:

• the local authority who provided land worth 拢3 million*
• central government contribution of 拢400,00
• the RSL whose total cost was 拢6 million (land at 拢2 million plus building costs of 拢4 million)

The highest cost is that of the RSL at 拢6 million. The cost of one unit is 拢150,000. The amount of the benefit from the living accommodation is:

Description	Amount
Cost of accommodation	拢150,000
Less	拢75,000
Additional yearly rent of	拢75,000 at 5% = 拢3750
Plus S105 benefit (GRV)	拢1200
Less rent paid by employee of	拢1200
Total	拢3750

Less excess rent of:

Description	Amount
Rent paid by employee	拢5200
Minus set against GRV of	拢1200
Excess rent is	拢4000
Amount of benefit is	Nil

The benefit is nil because the excess rent is more than the additional yearly rent.

*If the provider of the land acquired it less than six years before the sale, for the purposes of S106, the cost to the provider of acquiring that land is its actual cost and not its market value. See EIM11473, which explains whether market value or cost applies.