Reform stamp duty to help first-time buyers, MPs urge government

The government must reform stamp duty as part of a package to help first-time buyers get on the housing ladder, the House of Commons’ Housing, Communities and Local Government (HCLG) committee has said.

In a report on home ownership affordability published today, the cross-party group recommended the Ministry of Housing, Communities and Local Government (MHCLG) launch a consultation to examine alternatives to stamp duty by the end of 2026.

However, it acknowledged the tax is a “valuable source of revenue for public finances” and said reform should take place alongside a reform of council tax, which the committee called for in a previous report on local government finance.

Florence Eshalomi, chair of the 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.”

The suggested alternatives to stamp duty include a full replacement with a revenue-neutral alternative; a reduction in rates to stimulate transaction numbers; an overhaul of banding thresholds to tie more closely with local property prices and remain relevant over time; and an update to reliefs and exemptions so that they better meet the government’s goals.

The government’s consultation should consider factors including revenue-raising power, impact on friction in the property market, progressiveness and fairness, the group has advised.

The report also called for several other interventions on the affordability of home ownership. This includes urging MHCLG to publish annual homebuilding targets for each remaining year of the parliament and to provide updates every six months on what actions the government has taken to increase homebuilding rates by private developers.

Additionally, the committee recommended the government make it easier for councils to take control of empty properties in their local authorities by clarifying councils’ existing powers and providing new methods to recover long-term empty homes.

It also said the government should establish a statutory definintion of affordable housing, referring to local average income levels instead of just the local market values of rent or house prices. 

The report welcomed the replacement of the lifetime ISA with a new first-time buyer ISA announced by HMRC last month, but recommended the product does not include a static property price cap that would make it “unusable” in some parts of the country.

Rates of home ownership in England have declined over the last two decades, from a high of 71% in 2003 to 62.5% as of the 2021 Census.