London's housing crisis demands urgent action, and a leading thinktank has proposed a radical solution: scrapping stamp duty and council tax in favor of a new property wealth tax. This annual tax, known as the Proportional Property Tax (PPT), aims to address the city's housing disparities and provide much-needed funds for social housing. The report, by the Centre for London, highlights a concerning trend: while London's housing stock has increased, housing inequality has widened. The average floor space per person has risen by almost 30% since 2004, but this additional space disproportionately benefits higher-income owner-occupiers. The bottom 40% of households have seen a mere 6% increase in space, while the top 20% enjoy a 27% rise.
The consequences of this disparity are dire. Homelessness costs £5.5 million per day, and record numbers of Londoners are living in temporary accommodation. House prices have skyrocketed, reaching 12 times earnings, and a third of children live in poverty after housing costs. Businesses are struggling, too, as the high cost of housing stifles growth, investment, and talent. Rob Anderson, the director of research at the Centre for London, emphasizes the severity of the crisis, stating that "by every metric that matters, the housing crisis is at its worst."
The proposed PPT system would revolutionize London's housing market. Homeowners with larger properties in more expensive areas would pay the highest taxes, calculated as a percentage of their home's value. For properties up to £800,000, a base rate of 0.39% applies, rising to 0.01% for homes valued between £999,999 and £1 million, and 0.02% for every £200,000 above £1 million up to £5 million. This system offers significant savings for homeowners, with a £500,000 home in Greenwich saving £15,302 over 10 years compared to council tax and stamp duty land tax (SDLT). A £5 million home in Westminster would save £86,792 over the same period.
The benefits extend beyond homeowners. Private and social renters would no longer pay council tax, saving over £1,890 annually. First-time buyers would save £8,593 over five years of ownership, as they no longer face stamp duty. The proposal also considers those who are asset-rich but cash-poor, allowing them to defer the transition to PPT for up to a decade and continue with council tax. Anderson argues that removing stamp duty on ordinary movers would release 79,000 homes annually, providing much-needed relief to the housing market.
However, the Centre for London acknowledges that building more homes is essential but not sufficient. The report emphasizes the need to address the underlying issues within the housing system. Anderson states, "The problem cannot just be understood as a simple shortage in the number of homes. London can build more homes, but if housing policy only focuses on increasing supply, we risk missing the real problem: a housing system that fails to deliver enough homes overall."
In conclusion, the proposed PPT system offers a comprehensive solution to London's housing crisis, addressing both the financial burden and the need for social housing. By scrapping stamp duty and council tax, the city can take a significant step towards a more equitable and sustainable housing market. However, the report's authors stress that this is just one part of the solution, and a holistic approach is required to tackle the complex challenges facing London's housing sector.
