Abolish stamp duty and ease planning restrictions, urges TaxPayers’ Alliance

25 Jul 16

The government should scrap stamp duty and ease planning restrictions to address the worsening housing crisis, the TaxPayers’ Alliance has said today.

In a new report, the group called for “real reform” to tackle the housing shortage accusing successive governments of merely tinkering around the edges instead of dealing with underlying issues facing the sector.

Since April this year, a new surcharge of 3% has been added to the Stamp Duty payable on second homes worth more than £40,000. Introduced in the 2015 Autumn Statement, the measure was designed to encourage owner-occupancy, by cooling demand for buy-to-let properties. 

However, favouring a specific group only delays the failure of the housing supply to keep up with demand, and drives up rent rates as landlords pass the added costs onto tenants, the report claims. Consequently, the surcharge should be scrapped, along with stamp duty outright.

The report calls stamp duty a “badly designed tax which gums up property markets”, generates little money for the government and increases the costs of buying a house. The authors propose that stamp duty should initially be halved, before being phased out entirely.

Similarly, the restriction of finance cost relief for individual landlords helps prospective buyers at the expense of tenants in rental accommodation and should be scrapped.

The TaxPayer’s Alliance claims these policies distort the housing market, have negative implications for income, employment and overall welfare and make the already complex British tax system more confusing.

However, the fundamental problem with housing markets in Britain is overly tight planning restrictions, the group suggests. The alliance urges the government to declassify swathes of green-belt land to tackle the chronic lack of new house building. For example, it estimates that allowing just 5% of the greenbelt around London to be built on will enable the city to grow by one sixth.

Taller, denser housing construction should be also encouraged, as well as more infilling, despite the likely increased pressure on traffic systems and public services.

The alliance cites the work of groups such as the Campaign to Protect Rural England, the Victorian Society, and the “thousands” of local groups who successfully protect the character of communities.

However, protecting land from development restricts the supply of new properties and inevitably raises the cost of housing, the alliance argues. It says: “The political fact is that housing cannot become more affordable unless it becomes cheaper and easier to build more of it in the places where … groups object.”

Jonathan Isaby, chief executive of the TaxPayers’ Alliance, said: “For decades politicians have failed to tackle the root causes of the housing crisis: a chronic lack of supply. What’s more, stamp duty is still punitively high and gimmicky tweaks to the tax system will ultimately end up penalising tenants and increasing rents.”

Isaby is urging new chancellor Phillip Hammond to seize the opportunity “to drastically simplify and reduce property taxes, while removing planning restrictions which prevent huge swathes of land from being built on for no good reason at all”.

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