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Thinktank Proposes Property Wealth Tax for London Housing
The Centre for London has put forward a proposal to replace stamp duty and council tax with an annual property wealth tax as a potential solution to London’s housing challenges. The thinktank’s report suggests that a proportional property tax (PPT) could encourage downsizing, raise funds for social housing, and help renters save for deposits.
The report highlights that house prices in London are now approximately 12 times average earnings, compared to seven times in the early 2000s. It also notes that average floor space per person rose by almost 30% between 2004 and 2023, but this increase was concentrated among higher-income owner-occupiers. Households in the top 20% of incomes saw a 27% rise in space owned, while the bottom 40% experienced only a 6% increase.
According to the Centre for London, homelessness costs £5.5 million per day and record numbers of Londoners are living in temporary accommodation. The report also states that a third of children live in poverty after housing costs, and businesses have cited housing unaffordability as a constraint on growth, investment, and talent.
Proposed Tax Structure and Impact
Under the proposed PPT system, homeowners would pay tax as a percentage of their property’s value. Properties worth up to £800,000 would face a base rate of 0.39%. Homes valued up to £999,999 would pay an additional 0.01%, and those over £1 million would pay an extra 0.02% for every £200,000 up to £5 million.
The report provides examples: a £500,000 home in band D in Greenwich would pay £1,950 annually under PPT, saving £15,302 over 10 years compared to current council tax and stamp duty. A £5 million home in band H in Westminster would pay £41,000 annually, saving £86,792 over the same period.
Private and social renters would no longer pay council tax under the proposal, saving the typical renter more than £1,890 per year. First-time buyers would save £8,593 across five years of ownership with the removal of stamp duty. Asset-rich but cash-poor homeowners could defer the transition to PPT for up to a decade and continue with council tax, with the remainder payable on property sale.
The Centre for London estimates that removing stamp duty on owner-occupiers moving into their primary home would release an additional 79,000 homes per year. The thinktank projects the system could fund 106,000 social and affordable homes over the next decade.
The proposal is part of ongoing discussions about housing policy reform in London, as policymakers and industry professionals seek solutions to affordability and access.
Source: PropertyWire