Stamp duty and council tax should be scrapped and replaced with a new proportional property tax, according to a new report aimed at fixing London’s housing crisis.

The Centre for London believes a new annual tax on property owners would encourage downsizing and raise funds for social housing while helping renters save for a house deposit.

If private and social renters no longer had to pay council tax, the typical renter would save more than £1,890 a year. With no stamp duty, first-time buyers would save £8,593 across five years of ownership, according to the think tank.

It says while building more homes is vital, it’s only part of the reason housing need in the capital has worsened since the 2000s. London has roughly the same number of homes per 1,000 people in 2024 as in 2002, despite its population rising by about a third, while average floorspace per person rose by almost 30% between 2004 and 2023. However, this increased floorspace has accrued disproportionately to higher-income owner-occupiers.

System

Under its proposed system, homeowners with the largest properties in the most expensive areas would pay the most as a proportional property tax (PPT) would be calculated as a percentage of a home’s value. On those worth up to £800,000, the average base rate of 0.39% would apply, rising on higher-value homes, with those worth up to £999,999 paying an additional 0.01% charge. Over £1m, an additional 0.02% increment would be applied for every £200,000 up to a property value of £5m.

A £500,000 home in band D in Greenwich would have an annual PPT rate of 0.39%, or £1,950, saving £15,302 in the first 10 years compared with council tax and stamp duty.

Defer

Those who are asset-rich, but cash-poor would be able to defer the transition to PPT for up to a decade and continue with council tax. The rest would be payable on the sale of the property.

Centre for London reckons its radical reforms could pay for 106,000 social and affordable homes over the next decade. It also suggests introducing a new, municipal build-to-rent model that delivers good quality, additional and affordable homes at intermediate rents as well as giving councils stronger tools to acquire long‑term empty homes and properties linked to criminal landlords, for conversion to social and affordable rent.

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