Stamp duty "hampers mobility" as pensioners cling onto family homes

 
Catherine Neilan
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Family homes are being hogged by pensioners deterred from downsizing by the prospect of fees (Source: Getty)

Stamp duty is exacerbating the housing crisis, making it more difficult for young people to get a foot on the housing ladder, new research has suggested.

The findings indicated the tax dissuades people from moving, causing a bottleneck by putting off pensioners from downsizing, which blocks access to family homes.

The academic paper, published jointly by the London School of Economics and the VATT Institute for Economic Research, estimates the level of home moving would increase by 27 per cent if the levy was abolished outright.

Professor Christian Hilber, co-author of the report, said: “The key message of our paper is that stamp duty hampers mobility significantly.

“If you are a young family and you have an additional child, you’ll need an additional room, but the stamp duty is discouraging this kind of move because of the additional cost and lack of available homes to move into.

Read more: Opinion: Stamp Duty should be split up to save the property market

In a nutshell, the stamp duty discourages the elderly from downsizing and young expanding families from moving to more adequate larger housing.

Chancellor Philip Hammond has been under pressure to reform stamp duty from both industry and his own party.

Paul Smith, CEO of Haart estate agents, said: “Stamp duty is damaging not just for the housing market, but for society. It holds young people back from getting out of renting and into homeownership, and it prevents the elderly from downsizing and freeing up more family homes. It is a tax that causes extraordinary stress on people at critical times in their lives.

Read more: Stamp duty take reaches record high of £11.7bn

Our own survey of homeowners has shown that 49 per cent of those over the age of 55 intend to downsize in their next move, but 10 per cent of them said they cannot afford to do so and a further 10 per cent said the process was too much hassle.

Just 18 per cent of over-55s would consider selling their home in the next twelve months, compared to 37 per cent of 25-34 year olds. This demonstrates the fundamental problem of young people wanting to move up the ladder, but older people staying put at the top. The higher you go, the more likely you are to stay or become stuck in your property.

"The government is not listening because they have become so dependent on the income from stamp duty. But tactical interventions like a stamp duty exemption for first time buyers and better incentives for downsizers could make a big difference without costing the earth. If government reduced stamp duty across the board they could even increase their tax take through more transactions."

TaxPayers' Alliance chief executive John O'Connell added:"This pernicious tax prevents younger people from getting on the housing ladder, and stops older people downsizing to more manageable homes. This hurts people at every stage of life and has slowed the housing market in the UK, greatly damaging the economy. Brits are struggling under the heaviest tax burden in 30 years, and this is in part because the UK has the highest property taxes in the developed world. If the government wanted to help people to buy their own homes and get on in life, they should scrap this relic of a tax completely."

A Treasury spokesperson said: “Almost 90 per cent of people want to own a home, but only 63 per cent do.

“We reformed property taxes including stamp duty to help more people get onto the property ladder. In addition, we are helping people – including young families – to buy their first homes through policies such as Help to Buy and the Lifetime ISA, and the recent £2.3bn Housing Infrastructure Fund which will free up over 100,000 properties in high demand areas.”

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