Taxing questions for the housing strategy

Posted: June 11, 2026 | Author: julesbirch | Filed under: Home ownership, Stamp duty, Tax |Leave a comment

Originally written as a column for Inside Housing.

Sooner or later a government will have to grasp the nettle of reforming the way that housing is taxed.

Sooner is the implication of Andy Burnham’s still semi-declared campaign to be Labour leader and prime minister, with the would-be MP for Makerfield keen to reform ‘regressive council tax’ and saying that he believes that land is ‘under-taxed’. 

Soon, says the all-party Housing, Communities and Local Government (HCLG) Committee, in a report this week calling for reform of stamp duty land tax to improve affordability and a review of other property taxes. 

Later has been the answer from all previous governments as they look at the implications of reforming stamp duty, council tax and inheritance tax and see a political minefield ahead of them.

But it’s had to imagine a long-term housing strategy that does not include reform of property taxes, which may be one big reason why the timetable for the one expected from this government has slipped so much.

First promised ‘in the coming months’ in July 2024, the strategy has been scheduled for ‘the new year’, ‘the spring’ and then ‘later this year’ in 2025, then ‘in the spring of 2026’. The current position, almost two years into the Labour government, is that it will be published ‘in due course’.

The HCLG Committee report is ostensibly about the unaffordability of home ownership but places that in a much wider context: ‘Successive governments have tried to tackle the problem and failed to measurably improve the situation. It is an exceptionally complicated issue, affected by numerous factors that must be addressed in parallel to have any hope of success. It is also a problem aggravated by a central tension: we want homes to be cheaper and more people to own them, but policies focused on helping people to buy homes often make homes more expensive by diminishing the remaining supply.’

Successive governments have, in other words, made short-term interventions in the housing market that have only made things worse in the long term. 

The central manifesto pledge of this one is to deliver 1.5 million additional homes but, as the committee points out, even if that could be achieved (spoiler alert: it can’t) it would not improve affordability by itself. It needs to be accompanied by demand side policies that improve access to home ownership without worsening affordability.

Over the long term, say the MPs, ‘the ratio between wages and house prices needs to return to a more reasonable level’.

But what is a reasonable level? That is precisely the sort of question that a housing strategy should be answering. 

The report maps out a wide-ranging terrain that covers affordable as well as market housing and mortgage lending as well as tax. 

It also touches on what should be another huge issue for any housing strategy: the role of ‘the Bank of Mum and Dad’.

Dropping the euphemism, inherited wealth increasingly determines your chances of buying a home and it also helps to explain why house prices have become increasingly decoupled from wages. 

The report says that: ‘More should be done to ensure that everyone has a fair chance of buying a home if they want to, regardless of their family background.’ 

But the question of what that ‘more’ should be is another one that the housing strategy should be answering.

The final chapter of the report looks at the issue that witnesses told the committee has a strong bearing on the affordability of home ownership: stamp duty land tax.

The impact is felt most obviously by the buyers who pay the tax but it also ripples out across the whole market by suppressing transactions and restricting people from moving. 

The report could have pointed to wider effects too: stamp duty acts as a disincentive to downsizing by elderly owners of houses that are too big for them and makes it more difficult for young families to upsize.

And there is also evidence of a long-term relationship between activity in the housing market in general and private sector housebuilding: by suppressing transactions stamp duty reduces new supply.

Previous governments have responded to housing market slowdowns with stamp duty holidays that lead to a temporary surge in transactions followed by a lull as the tax is reimposed.

But the time for tinkering is surely over. As the committee’s report concludes: ‘All changes considered must be intended to apply for the long term, without short-term “fixes” that can exacerbate the problem by distorting market behaviour.’

So what next? There are plenty of proposals out there that could generate the same revenue as the current system, be fairer and go a long way towards fixing the housing market. Some even address social care and the state of local government finances too.

There have been calls from across the political spectrum for stamp duty and council tax to be replaced by a proportional property tax. 

Last month the Centre for London came up with a plan it said could also generate 100,000 new social homes over a decade. 

There will be resistance to this agenda from the Treasury, which told the committee that stamp duty raises £14 billion a year and abolishing it ‘is not directly on the agenda’. 

But tax reform has to be part of a long-term housing strategy if it is to be worthy of the name. 

---