If the government’s answer to the housing crisis is to raise the threshold for paying stamp duty (SDLT) for some homebuyers, they are not asking the right question. Fixing stamp duty rates will not help address the fundamental problem in our broken housing system: the lack of social and truly affordable housing.
A further increase in housing demand—especially social and affordable housing—without increasing the housing stock will almost certainly lead to higher prices. This is what we saw when then Prime Minister Rishi Sunak cut stamp duty during the pandemic. By the end of Sunak’s first SDLT holiday in June 2021, ONS Statistics Display prices are up 12.2% from the previous year when the program was launched. An average £284,000 property sale in England saves £4,200 in stamp duty, far exceeding the average price increase over the same period (£30,785).
Housing availability and affordability is clearly not a priority for ministers.And the cost of this policy is huge treasury Revenue losses over the next five years exceed £7 billion. In the face of persistent interest rate rises, ministers appear bent on propping up house price growth in London and the South East, betting that any good for the property sector will benefit the rest of us.
This is a deeply worrying sign that the new government understands housing only as a means of economic growth, not primarily as a ‘First is social service” (as 1951 Conservative Party Manifesto housing described) and the foundation upon which people build their lives and take root in their communities.These stamp duty cuts are simply the wrong priorities, especially at a time when further rent increases and the cost of living crisis could lead to 20,000 households Their landlord made them homeless last year.
The reality is that those with the most housing wealth in the most expensive areas of the country – mainly London and the South East – will benefit as they can now expect to sell their properties for higher prices.Most first-home buyers outside London buy their first home for under £300,000; capital is UK only In 2021, the average cost of a first-time home buyer exceeds this figure. As a result, the vast majority of first-home buyers outside London will not feel any benefit from last week’s announcement, and may only face further affordability challenges as prices rise.
Adjusting the stamp duty threshold is not the most efficient way to do this, even if we ostensibly look at the government’s main aim to increase the number of property transactions. This is because stamp duty is a tax on these transactions, so its very existence is an obstacle in the system. Also, it’s unfair because it imposes a (often very exorbitant) fee on those who have had difficulty buying their own home due to price increases in recent decades. Meanwhile, buy-to-let landlords will incur no stamp duty costs when selling properties in their portfolios, enjoying (aside from limited capital gains liabilities) virtually unlimited benefits from years of rising rents and house prices.
Serious options exist for introducing a more efficient and fairer property tax system.1. Recommendations Intellectual Property Protection, Stamp Duty was repealed along with Council Tax – arguably more regressive than SDLT – and replaced by a property tax on property owners and landlords. This will better address wealth inequality in regions where housing is the main driver.Overhauling our property tax system won’t be easy, but if ministers object to what they describe ‘treasury orthodoxy‘As they say, these are things that they should seriously consider.
Rather than mending this fundamentally flawed and unfairly taxed threshold, the most important step the Prime Minister could have taken to fix our broken housing system is to make it easier for local authorities and housing associations to create social and affordable housing. The nation is so urgent need. This will reduce council waiting lists and provide much-needed safe, secure housing for the most vulnerable in our society, while easing pressure on the private rental sector. Subsequent rent declines will allow tenants to save even more, while some landlords leaving the market will increase housing affordability.
This week the opposition challenged the government and told us their mantra will be ‘council housing, council housing, council housing‘.However, these stamp duty cuts, along with the proposed supply of affordable housing, could be undone as we await this government’s broader housing policy. ‘The investment district’s hope that ministers will address a fundamental problem in our housing system does not bode well: a chronic lack of social and affordable housing.
picture: HM Treasury on Flickr (CC BY-NC-ND 2.0)
