It seems the Government is fishing for revenue-generating ideas wherever it can find them at the moment, and UK property ownership has once again become the target.
In the space of just a couple of days we’ve had two different ideas floated in the press regarding new taxes on housing, which on the surface appear to be designed less to fix the housing market and more to test how far the Chancellor can push public opinion.
The latest newspaper reports suggest Rachel Reeves is considering a levy on expensive homes – potentially starting at £2m but with talk of thresholds as low as £1m. Add this to speculation about scrapping Stamp Duty altogether and replacing it with a new property tax on homes sold over £500,000, and it looks very much like the Treasury is policy kite flying. The problem is that even flying the kite is likely to cause damage.
Just by raising these possibilities, sellers may delay putting their homes on the market. Buyers may pause or exit already-agreed offers because they don’t know what their eventual liability will be – will Stamp Duty exist or not in the future? Might they save thousands of pounds if they hang on?
It could mean chains stall, confidence dips, and the market slows just as it was starting to build some momentum again. We’ve seen it before; every time Stamp Duty is tinkered with, activity changes. Do we think this is the right moment to create more uncertainty?
And what exactly do these proposals achieve? They certainly don’t get to the root of the housing challenge. The latest data via Nationwide shows England’s housing stock is actually growing faster than its population.
Supply in headline terms is not the real issue. The real problem is distribution, too many people living in the wrong homes. Older owners remain in large family houses they no longer need, younger families are squeezed into smaller spaces they have outgrown, and first-time buyers remain locked out.
These potential property taxes do nothing to fix that. In fact, it risks making it worse. At the higher end, older homeowners are likely to sit tight rather than face the prospect of a new levy, freezing up the supply of family housing. That keeps stock off the market when it is most needed.
It also discourages investment in existing properties. Older homes are already less efficient, typically producing five tonnes of carbon a year compared to around two tonnes for a modern energy-efficient house. Many older homeowners are reluctant to fund costly upgrades when they are uncertain about their long-term plans. Add new tax penalties into the mix and they become even less likely to move or modernise. That’s bad news for the housing market and bad news for the environment.
What we need instead is a grown-up conversation about ‘right sizing’. It’s not about punishing people for owning valuable homes; it’s about encouraging movement so that housing stock is used more effectively.
Incentivising downsizers to move would be a far more constructive measure. It would make it easier for older households to move into properties that suit them, while freeing up family housing for younger buyers. That would deliver social benefits, improve the utilisation of housing, and cut carbon emissions.
The data presented here is thought-provoking in the extreme and should perhaps reset the housing supply debate. If we already have adequate stock levels, but just the ‘wrong’ people living in these houses, then we can rein back on new builds on greenfield sites, and the like, which is clearly bad for the environment, and judging by these figures, unnecessary.
And here’s the other critical point the Government seems to overlook: a highly active housing market is not just good for those buying and selling, it’s good for the wider economy.
Every transaction generates tax revenue far beyond stamp duty – from VAT on removals, refurbishments, furniture and white goods, through to the jobs it supports in advice, lending, conveyancing, surveying and construction, and then some. It’s one of the most powerful economic multipliers the Treasury has at its disposal.
Yes, Stamp Duty reform is overdue, but it needs to be done properly. Changes must be carefully designed to avoid market distortion, and they should be implemented with enough clarity and certainty to avoid stalling activity.
Throwing multiple half-formed ideas into the press just to gauge the reaction is not a strategy, it’s a risk. It risks undermining confidence, delaying decisions, and halting existing activity.
If the Government wants to deliver growth, it should be thinking about how to encourage people to act – to buy, to sell, to move. It should be incentivising right sizing, delivering a much-needed replacement for Help to Buy, supporting the construction of new homes where they are needed, and freeing up family housing for those who require it. That would be a housing policy with purpose.
Instead, what we are getting looks like kite flying dressed up as reform. It may give the Treasury some sense of where the political wind is blowing, but it risks stalling the market in the process. At a time when housing should be one of the engines of our economy, that’s a mistake we can ill afford.
Sebastian Murphy is group director at JLM Mortgage Services
