The Resolution Foundation has called on the government to set out a roadmap for reforming residential property taxes.
In a new report, the think tank said council tax and stamp duty are increasingly out of step with modern house prices and warned that England’s housing taxes have become “broken”.
The report claimed the system disproportionately benefits owners of higher-value homes, particularly in London, while many households elsewhere pay more tax relative to the value of their properties.
According to the analysis, around 80% of households in London benefit from the current approach, while 85% of households in the North East are projected to overpay compared with a proportional property tax.
The think tank argued that the UK’s two main housing taxes are “terribly designed”, adding that they are both “grossly unfair and economically harmful”.
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Discouraging impact of stamp duty
A key concern raised in the report was the impact of stamp duty on housing market activity.
The Resolution Foundation estimated that stamp duty prevents around 100,000 home purchases each year by discouraging people from moving, whether to downsize, upsize or relocate for work.
It said the tax can prevent people from living in homes that better suit their needs and may restrict wider economic activity as a result.
Hannah Aldridge, senior research and policy analyst at the Resolution Foundation, said: “Our housing taxes fall heaviest on those least able to afford them.”
She added that the current system had become a “£3.1bn subsidy for those living in London”, which she said was “paid for by households across the rest of England”.
Aldridge said the “economic and fairness case” for reform was clear, but acknowledged that change would take time.
She added: “Housing taxes cannot be fixed overnight. But the Chancellor should set out a sensible roadmap to reform in the Budget next month.”
