A consultation on stamp duty land tax should be launched by the end of this year, according to a Housing, Communities and Local Government Committee (HCLG) report into affordability and barriers to home ownership, particularly amongst those on lower incomes.
The inquiry, launched in July last year, set out to examine how the government supports first-time buyers through reliefs and financial products.
The Affordability of Home Ownership report sets out how the Housing Committee considers government could tackle the “deterioration in the affordability of home ownership” and points to “skyrocketing house prices, slow wage growth and unnecessary barriers in the market.”
The committee warns the issue is “exceptionally complicated” given the efforts of successive governments to tackle the decline in home ownership, which has dropped from 71% in the 2003 census to 62.5% in the 2021 census.
The oral and written evidence submitted to the committee focused on supply interventions – including the commitment to build 1.5 million net additional dwellings – and demand interventions, including insecure employment, and access to finance and deposits. The committee supports replacing the lifetime ISA with a new product focused on home buying, as well as the work being done by the Financial Conduct Authority (FCA), amongst others, to create more access to finance.
Earlier this week the FCA said it would update borrowing rules to enable first-time buyers, older borrowers and the self-employed to secure a mortgage.
The much-discussed 1.5 million homes target has also been examined, with the committee calling for the publication of annual homebuilding targets for each remaining year of this parliament and six-monthly updates on progress, to include homebuilding rates by private developers.
The committee also supports efforts to reform leasehold tenure and replace it with commonhold, as well as improve shared ownership models. But it called for further action on stamp duty reform, the repurposing of empty and under-occupied homes and supporting builders with access to finance for building.
SDLT “slow(s) the whole housing market and damage(s) the economy”, and the report calls for a consultation into potential alternatives by the end of 2026. Suggested options include a replacement of SDLT with another, proportional tax relative to property type, value or location; a reduction in tax to stimulate demand (which would in turn create more income from SDLT as activity in the market increases); an overhaul of banding thresholds; and an update to the 49 reliefs and exemptions to create greater clarity.
Repeating its calls from The Funding and Sustainability of Local Government Finance report published last year, the committee suggests any discussion on SDLT should be done alongside an overhaul of council tax. Any action taken by the government would need to account for the £14 billion SDLT raised last year.
Florence Eshalomi MP, chair of the HCLG Committee, said: “Rates of home ownership in England have declined over the last 20 years. For many people, and especially for those unable to draw upon the bank of Mum and Dad, the prospect of owning a home is little more than a pipe dream. No silver bullet exists but the government can apply a range of supply and demand-side measures to help people get on the property ladder.
“Progress on delivering the 1.5 million new homes in this parliament is vital. Councils should also be empowered to play a greater role in housebuilding and given additional powers to bring empty and under-occupied homes back into residential use.
“Reform of stamp duty is necessary but, especially given the public finance implications, this cannot be done in isolation or without a credible alternative in place. We urge the Ministry of Housing, Communities, and Local Government and HM Treasury to consult on alternatives to stamp duty that can deliver long-term benefit and not a short-term fix which only distorts the housing market and exacerbates the affordability problem”.
