A leading thinktank has proposed scrapping stamp duty and replacing it with a new property wealth tax to address London's housing crisis. The Centre for London's report suggests an annual tax to replace the levy paid when buying a property and council tax, which would encourage downsizing and raise funds for social housing, while also helping renters save for a house deposit.
Housing Inequality Worsens
The research highlights disparities in space between the poorest and wealthiest homeowners. Average floor space per person rose by almost 30% between 2004 and 2023, but this additional space went disproportionately to higher-income owner-occupiers. Households in the top 20% of incomes saw a 27% rise in space owned, whereas the bottom 40% had a rise of just 6%. This means that despite London having more housing available per person than 20 years ago, housing inequality has widened.
Acute Problems
The report describes acute problems in London's housing market: homelessness costs £5.5 million a day, and record numbers of Londoners are living in temporary accommodation. House prices are 12 times earnings, up from seven in the early 2000s, and a third of children live in poverty after housing costs. Businesses also say the unaffordability of housing is strangling growth, investment, and talent.
Rob Anderson, director of research at the Centre for London and co-author of the report, said: "By every metric that matters, the housing crisis is at its worst."
Radical Reforms Proposed
The paper outlines radical reforms, including scrapping stamp duty and council tax and replacing them with a partly devolved annual proportional property tax (PPT) that could pay for 106,000 social and affordable homes over the next decade. Homeowners with the largest properties in the most expensive areas would pay the most tax under the proposed system. PPT would be calculated as a percentage of the home's value. On homes worth up to £800,000, the average base rate of 0.39% would apply. This rate rises on higher-value homes, with those worth up to £999,999 paying an additional 0.01% charge. Over £1 million, an additional 0.02% increment is applied for every £200,000 up to a property value of £5 million.
Under the proposals, a £500,000 home in band D in Greenwich would have an annual PPT rate of 0.39%, or £1,950, saving £15,302 in the first 10 years compared with council tax and stamp duty land tax (SDLT). A £5 million home in band H in Westminster would pay PPT at 0.82%, or £41,000 a year, saving £86,792 in the first 10 years compared with council tax and SDLT.
Benefits for Renters and First-Time Buyers
Private and social renters would no longer pay council tax, saving the typical renter more than £1,890 a year. With no stamp duty, first-time buyers would save £8,593 across five years of ownership. Those who are asset-rich but cash-poor, for example those downsizing whose homes have risen significantly in value, would be able to defer the transition to PPT for up to a decade and continue with council tax. The rest would be payable on the sale of the property.
Anderson said: "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."
The abolition of council tax, pegged to values from 1991, would also lift a weighty financial burden from renters, enabling them to more easily save for a deposit on their first home.
Context and Challenges
The Centre for London joins the pleas of the housebuilding sector to help first-time buyers save the deposit needed to buy a home in London, which averaged almost £150,000 for those buying without family assistance in 2024. House prices in London have risen by more than 200% since 2002. Although "building more homes is a given," the picture is far more complex, according to the Centre for London. "The problem cannot just be understood as a simple shortage in the number of homes," Anderson added. "London can build more homes and it must. But if housing policy only focuses on increasing headline supply numbers and beating delivery targets, we risk missing the real problem: a housing system which is not delivering enough homes overall."
