A number of newspapers have reported that pressure within the government is being placed on the Chancellor for changes in his Autumn budget.
Chancellor Philip Hammond is coming “under pressure” from the Cabinet to make stamp duty less onerous – or even scrap the transaction levy altogether – according to a front-page report in today’s Telegraph.
Citing a new research paper by the London School of Economics and the VATT Institute for Economic Research, it’s argued that SDLT “discourages the elderly from downsizing and young expanding families from moving to more adequate larger housing”.
Replacing SDLT with an annual property tax could raise housing transactions by about 27%
The report argues that replacing SDLT with an annual property tax could raise housing transactions by about 27%.
LSE’s Prof Christian Hilber, co-author of the report, told the Telegraph: “The key message of our paper is that stamp duty hampers mobility significantly.
“If you are a young family and you have an additional child, you’ll need an additional room, but the stamp duty is discouraging this kind of move because of the additional cost and lack of available homes to move into.
“In a nutshell, the stamp duty discourages the elderly from downsizing and young expanding families from moving to more adequate larger housing.”
Hilber has been a staunch opponent of stamp duty for quite some time. In 2012, he co-authored a paper which concluded that “a higher stamp duty negatively affects a household’s propensity to move and the expectation that a move is imminent,” and estimated that “a £5,000 increase in the stamp duty reduces mobility by roughly 30%.”
He’s also previously blamed the planning system for Britain’s housing crisis, arguing in March this year that property affordability issues are largely down to construction and supply constraints.
This time, stamp duty is back in the firing line. High rates actively discourage pensioners from downsizing, says Hilber, and so constrains stock levels for growing families who need more space.
There is little doubt that George Osborne’s tinkering and overhaul of the stamp duty regime slashed property market activity, making home-moves and investment acquisitions a lot less appealing, particularly at the top-end.
The OECD worked out last year that the UK has the highest property taxes in the developed world.
The present levels of stamp duty are clearly counterproductive, in terms of housing policy and revenue alike, and need to be reduced
Former Chancellor, Lord Lawson of Blaby, weighed-in on the matter, telling the Telegraph that “The present levels of stamp duty are clearly counterproductive, in terms of housing policy and revenue alike, and need to be reduced,” adding: “For what it’s worth, when I was Chancellor, I halved the rate of stamp duty on house sales, and the revenue increased.”
And Mark Littlewood, Director General of the Institute for Economic Affairs, agrees: Stamp duty “is not a tax on wealthy property owners,” he told the Telegraph. “It is essentially a tax on moving home. Britain’s extortionate housing market is broken enough already without further penalising homeowners by charging them thousands of pounds unless they stay put in their current property.
“The government is actively encouraging people, especially the elderly, to remain in large properties when they would prefer to downsize and release a family-sized home onto the market.
“Given the difficulty young families already face in getting on the housing ladder, it is an absurdity that the government is making it even harder through this outdated and nonsensical tax policy.
“If the Chancellor fails to take action in the budget this autumn, he will be guilty of exacerbating the crisis in our housing market.”
An HM Treasury spokesperson responded to the report with this: “Almost 90% of people want to own a home, but only 63% do. We reformed property taxes including stamp duty to help more people get onto the property ladder.
“In addition, we are helping people – including young families – to buy their first homes through policies such as Help to Buy and the Lifetime ISA, and the recent £2.3bn Housing Infrastructure Fund which will free up over 100,000 properties in high demand areas.”