A major new report has called for stamp duty and council tax to be scrapped and replaced with a new annual proportional property tax in a radical attempt to tackle London’s worsening housing crisis and fund a huge expansion in social housing.
The proposals, published by London think tank Centre for London, argue that Britain’s current property tax system is actively worsening housing inequality, discouraging downsizing and mobility, and restricting access to family homes across the capital.
The report claims that abolishing stamp duty alone could unlock an additional 79,000 home moves every year in London, including 24,000 three and four-bedroom homes, by removing the financial barriers preventing homeowners from moving.
Under the proposed reforms, council tax and stamp duty would be replaced by a Proportional Property Tax (PPT), charged annually based on a property’s value and paid by homeowners rather than renters.
HOUSING CRISIS
Centre for London estimates the model would save the average London renter almost £24,000 over 10 years, while first-time buyers would save an average of £8,593 during their first five years of homeownership by avoiding stamp duty costs.
At the same time, the think tank claims the reforms could generate an additional £912m annually for social housebuilding, potentially delivering 106,000 new social homes over the next decade.
The report paints a stark picture of London’s housing crisis, arguing that the capital would have needed to more than double housebuilding every year for the past two decades in order to materially improve affordability levels.
Researchers found that while Londoners today have almost 30% more floorspace per person than in 2004, the gains have been heavily skewed towards wealthier homeowners. Meanwhile, the number of social and affordable homes per 1,000 people has fallen by 20% since 2002.
The report also sharply criticises council tax, describing it as regressive because owners of multimillion-pound homes often pay little more than households in far cheaper properties.
POLICY FAILURE
Rob Anderson, Director of Research at Centre for London and co-author of the report, says: “London’s housing system is broken. For millions of Londoners, an affordable home is out of reach and more people than ever are homeless.
“This is a failure of both supply and demand-side policy. We’ve failed to help the market build enough homes overall, allowed affordable housing to collapse, and taxed housing in a way that creates more housing inequality, so the homes we do have are less well matched to people’s needs.
“We need to both build more homes and ensure that supply reaches those who need it. Property tax reform – which promotes a fairer housing market, while generating desperately needed funding for social housebuilding – is the best way to do that.”
POLITICAL DEBATE
The proposals arrive amid growing political debate over housing affordability, tax reform and social housing delivery, particularly as the Government pushes towards its target of building 1.5 million homes over the next Parliament.
Ian McDermott, Chief Executive Officer of Peabody and Chair of the G15 group of London housing associations, says: “This is a thoughtful and ambitious report which reflects the scale and complexity of London’s housing emergency.
“This is a crisis affecting the whole country and we welcome the debate about how devolution, housing and tax reforms can better support mobility, affordability and long-term investment in housing across the capital and beyond.”
