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Thinktank Proposes Replacing Stamp Duty and Council Tax in London

A new report from the Centre for London recommends scrapping stamp duty and council tax, replacing them with a property wealth tax to address the capital’s housing crisis. The thinktank’s proposal aims to free up homes, fund social housing, and help renters save for deposits.

The report highlights that house prices in London are now about 12 times average earnings, up from seven times in the early 2000s. It also notes that homelessness costs £5.5 million a day and that record numbers of Londoners are living in temporary accommodation. According to the research, a third of children in London live in poverty after housing costs.

The Centre for London’s proposal suggests an annual proportional property tax (PPT) to replace both stamp duty and council tax. The PPT would be calculated as a percentage of the property’s value, with higher rates for more expensive homes. For example, a £500,000 home in Greenwich would have an annual PPT rate of 0.39%, or £1,950, saving £15,302 over ten years compared to current council tax and stamp duty. A £5 million home in Westminster would pay 0.82%, or £41,000 per year, saving £86,792 over ten years.

Under the proposed system, private and social renters would no longer pay council tax, saving the typical renter more than £1,890 a year. First-time buyers would save £8,593 across five years of ownership due to the removal of stamp duty. The report also suggests that those who are asset-rich but cash-poor could defer the transition to PPT for up to a decade, continuing to pay council tax until the property is sold.

The report found that average floor space per person in London increased by almost 30% between 2004 and 2023, but this growth mainly benefited higher-income owner-occupiers. Households in the top 20% of incomes saw a 27% rise in space owned, while the bottom 40% experienced a 6% increase, indicating widening housing inequality.

The Centre for London estimates that removing stamp duty on ordinary movers could release an extra 79,000 homes a year and raise funds for investment in social and affordable housing.