Centre for London, the capital’s independent think tank, has published a major new report on London’s housing crisis – calling for the abolition of Stamp Duty and Council Tax, to be replaced with a fairer and more effective Proportional Property Tax (PPT), as part of a wider package of reforms to fix London’s housing crisis.

Headline statistics from the report:

• A proportional property tax (PPT) would save the average London renter £24,000 over 10 years, and a first-time buyer an average of £8,593 in their first five years.
• At the same time, Centre for London’s PPT model would generate an additional £912m a year for social housebuilding, doubling our current social housebuilding rate annually.
• Abolishing Stamp Duty could unlock 79,000 additional homes each year, including 24,000 three- and four- bed properties.
• London has more housing per person than twenty years ago. Average floorspace per person rose by almost 30% between 2004 and 2023. Most of this additional housing has accrued to homeowners and people on higher incomes.
• To significantly improve affordability, London would have needed to more than double its housebuilding every year for the past two decades – equivalent to adding the entire housing stock of Birmingham twice over.

Centre for London’s new research demonstrates that while building more homes will help bring down prices over time, the way existing homes are distributed is also a key driver of London’s housing crisis. Analysis shows that if housing stock had grown by an extra 1% a year since 2002, affordability today would be closer to the rest of England.

But this would have required unprecedented delivery. To significantly improve affordability, London would have needed to more than double its housebuilding every year for the past two decades – equivalent to adding the entire housing stock of Birmingham twice over.

Supply is critical. Without recent housebuilding, the crisis would be far worse. But the report also brings housing distribution into the debate.

London has more housing per person than twenty years ago. Average floorspace per person rose by almost 30% between 2004 and 2023. But this additional space has not been shared equally across tenures.

Most of this additional housing has accrued to homeowners and people on higher incomes, while low-income households and renters have lost out. While the overall number of homes per-person has stayed the same since 2002, there’s been a 20% fall in the number of social and affordable homes per 1,000 people. Social housing delivery has not kept up with need, reducing availability of genuinely affordable homes and pushing Londoners into insecure and overcrowded housing.

Our tax system reinforces these inequalities. Stamp Duty discourages moving, downsizing and the efficient use of housing stock. London property prices mean first-time buyers in London on average pay £10,000 in Stamp Duty on top of their deposit for a home. Downsizers often pay double that. As a result, housing turnover in London is a third lower than the national average.

Stamp Duty costs create a bottleneck, limiting access to family-sized homes. Abolishing Stamp Duty could unlock 79,000 additional homes each year, including 24,000 three- and four- bed properties.

Council Tax is also regressive. Those in larger, high value homes pay little more than people in smaller properties. For example, a homeowner in a £1.8m five-bed home in Kensington faces a similar bill as a two-bed renter in Croydon.

Centre for London has modelled a proposal for a single replacement: a Proportional Property Tax. This would be charged annually based on property value, paid by the owners. The model is fiscally neutral outside London and partially devolved, giving local leaders new tools to tackle the housing crisis.

This reform would cut costs for most households. Renters would no longer pay Council Tax, directly saving the typical London renter over £1,890 a year, rising to almost £24,000 over ten years. First-time buyers would no longer pay Stamp Duty, saving an average of £8,593 in their first five years as homeowners. Together, these would ease the cost of living and put homeownership back in reach for many more Londoners.

Centre for London’s PPT model would also generate an additional £912m a year for social housebuilding. Added to existing funding, this could deliver 106,000 new social homes in the next decade, helping rebuild social housing capacity after decades of decline and missed housebuilding targets.

The PPT sits at the heart of a wider package of 17 reforms. Together, they would boost private supply, radically expand affordable delivery, and promote a more efficient and equitable distribution of stock.

The message is clear: London must build more homes. But it must also tackle inequalities in how homes are distributed, while prioritising social housebuilding. 

Only by tackling all three can the housing crisis be resolved.

Rob Anderson, Director of Research at Centre for London, and co-author of this report, comments below: 

“London’s housing system is broken. For millions of Londoners, an affordable home is out of reach and more people than ever are homeless.

This is a failure of both supply and demand-side policy. We’ve failed to help the market build enough homes overall, allowed affordable housing to collapse, and taxed housing in a way that creates more housing inequality, so the homes we do have are less well matched to people’s needs.

We need to both build more homes and ensure that supply reaches those who need it. Property tax reform – which promotes a fairer housing market, while generating desperately needed funding for social housebuilding – is the best way to do that.

Our recommendations are a package that will make it cheaper and easier to build homes, scale up social housebuilding, and rebalance London’s housing market. Taken together, they would create a system that works better for Londoners – and gives more people the chance of a secure, decent and suitable home.”

Ian McDermott, Chief Executive, Peabody and Chair, G15, comments below: 

“This is a thoughtful and ambitious report which reflects the scale and complexity of London’s housing emergency. This is a crisis affecting the whole country and we welcome the debate about how devolution, housing and tax reforms can better support mobility, affordability and long-term investment in housing across the capital and beyond.”

ENDS

Notes to Editors:

• Centre for London is London’s think tank. A voice for all London is, and could be. We’re fiercely independent and consistently influential. Our vision is a London that’s successful and sustainable. A global city that works for all Londoners.
• The PPT recommendation forms a package of recommendations which taken together aim to shift the dial on the housing crisis. Other recommendations include:
  • Planning reforms, to make the process of building homes quicker, more predictable and cheaper.
  • A Right to Sell Scheme, offering older homeowners a route to release equity to fund liveability improvements and home care costs, while creating a long-term route for councils to acquire homes for conversion to social and affordable rent.
  • A London-wide ‘Help to Move’ scheme to support older homeowners to downsize to homes that better suit their needs, releasing up to 4,000 larger homes a year.
  • Compulsory purchase powers, to bring empty homes back into long-term use and tackle rogue landlords

• This PPT model includes protections for asset-rich, cash-poor households and transitional measures to prevent double taxation for recent buyers.
• We can provide the key data on precepts, including exact data on the rates for national, regional and local government – to generate the same tax receipts as Stamp Duty and Council Tax and to pay for the increase in London’s AHP.
• Methodology is available in full below:

METHODOLOGY: Centre for London modelled how a partially devolved Proportional Property Tax could replace Stamp Duty on domestic purchases and Council Tax revenues, while generating a significant surplus for reinvestment in the delivery of social and affordable housing in London.

To do so, we used Land Registry data on 2.7 million London property transactions since 1995, VOA data on Council Tax dwelling stock, and Price Paid data from the UK House Price Index to estimate the current value of dwelling stock in London and England.

We model a partially devolved property tax applying to all privately owned residential dwellings currently eligible for Council Tax, payable by the owner and excluding social homes. This is composed of three rates: a national rate set by central government applying to all residential dwellings in England, a local rate set by the local authority applying to all residential dwellings in the area, and a regional rate set by current strategic authorities.