Scrap stamp duty and council tax to fix housing crisis claims think tank

A recent report by the Centre for London think tank proposes scrapping stamp duty and council tax as a solution to London’s ongoing housing crisis. The report argues that reforming property taxes could improve affordability, fairness, and generate significant funding for social housebuilding.

Reforming Property Taxes to Address Housing Challenges

The Centre for London’s report, based on extensive data from Land Registry, the Valuation Office Agency, and the UK House Price Index, suggests replacing stamp duty and council tax with a proportional property tax (PPT) on all privately owned residential dwellings liable for council tax, excluding social housing. This reform aims to create a fairer and more transparent tax system.

According to the report, this new tax model would save the average London renter approximately £24,000 over ten years, equating to around £1,890 annually. First-time buyers would also benefit, saving an average of £8,593 in their first five years of homeownership. Additionally, the PPT could generate an extra £912 million annually to fund social housebuilding, potentially doubling current delivery rates.

London’s Housing System: A Call for Change

Rob Anderson, director of research at Centre for London and co-author of the report, emphasised the urgency of reform: “London’s housing system is broken. For millions of Londoners, an affordable home is out of reach and more people than ever are homeless.”

He highlighted the failure of both supply and demand-side policies, noting that insufficient housing supply, declining affordable housing, and a tax system that exacerbates inequality have contributed to the crisis. Anderson advocates for building more homes and ensuring supply meets demand, with property tax reform playing a central role in creating a fairer housing market and funding social housebuilding.

He added, “Our recommendations are a package that will make it cheaper and easier to build homes, scale up social housebuilding, and rebalance London’s housing market. Taken together, they would create a system that works better for Londoners and gives more people the chance of a secure, decent and suitable home.”

Impact on Stamp Duty and Homebuyers

Currently, stamp duty is payable on property purchases above certain thresholds, with first-time buyers exempt up to £300,000 and standard purchases exempt up to £125,000. The 2024 Autumn Budget saw Chancellor Rachel Reeves increase the stamp duty surcharge on additional homes from 3% to 5%.

The report claims that abolishing stamp duty could unlock 79,000 additional homes annually, including 24,000 three- and four-bedroom properties. First-time buyers would no longer pay stamp duty, saving an average of £8,593 in their first five years of ownership.

What this means for landlords

For landlords, the proposed reforms could have several implications. Removing stamp duty and council tax in favour of a proportional property tax may simplify tax liabilities and potentially reduce upfront costs associated with property transactions. This could encourage more transactions and investment in the housing market, potentially increasing the availability of rental properties.

Moreover, the additional funding generated for social housebuilding could help address the shortage of affordable homes, indirectly easing pressure on the private rental sector. However, landlords should monitor how these changes might affect overall property values and demand in London’s evolving housing market.

Source: Based on reporting from Property118

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