A leading thinktank has proposed that London's housing crisis could be resolved by scrapping stamp duty and council tax in favour of a new annual property wealth tax. The Centre for London's report argues that an annual proportional property tax (PPT) would encourage downsizing, help renters save for a house deposit, and raise funds for social housing.
Record Numbers in Temporary Accommodation
The report comes at a time when a record number of Londoners are living in temporary accommodation, with house prices soaring to 12 times earnings. Since 2002, house prices in London have risen by more than 200 per cent, while housing inequality has worsened. The research found that average floor space per person has increased by almost 30 per cent, but this has largely benefited higher-income households. The top 20 per cent of earners have seen a 27 per cent rise in space owned, compared to just 6 per cent for the bottom 40 per cent.
Proposed Annual Proportional Property Tax
The Centre for London suggests radically changing home purchase taxation by introducing a PPT calculated as a percentage of the home's value. An average base rate of 0.39 per cent would apply to properties worth up to £800,000. For properties worth over £1 million, an additional 0.2 per cent increase would be applied for every £200,000 up to £5 million. For example, a band D home in Greenwich valued at £500,000 would have an annual PPT charge of £1,950, saving more than £15,000 in the first 10 years compared to current taxes.
Benefits for Renters and First-Time Buyers
Under the proposed reforms, private and social renters would no longer pay council tax, saving the typical renter £1,890 each year. This would enable renters to save for a deposit to become first-time buyers. The PPT could also fund 106,000 affordable homes over the next decade.
Rob Anderson, director of research at the Centre for London, stated: "By every metric that matters, the housing crisis is at its worst. It is widely acknowledged by economists and politicians from different parties that stamp duty has a disruptive effect on the housing market and both stamp duty and council tax act as an incentive to hold on to property. Removing stamp duty on ordinary movers would release an extra 79,000 homes a year, while raising funds for investment into social and affordable housing."
Impact on Businesses
Businesses have also reported that a lack of property affordability is damaging growth and investment. The thinktank's proposals aim to address these concerns by making the housing market more accessible and efficient.
