The government is being urged to consider major changes to its housing policy ahead of the Budget, ranging from abolishing stamp duty to allowing local authorities to build more homes.
In its Budget submission to the Treasury the London Chamber of Commerce and Industry (LCCI) backed a call from chancellor Philip Hammond’s own colleagues to allow councils in the capital to borrow money to build more homes.
Undersupply of housing is having a major effect on London businesses, with 50,000 extra homes needed per year over the next decade, according to LCCI forecasts.
The shortage of affordable housing in the UK has become a crucial political issue for the Conservative government after it unexpectedly lost its majority in June’s General Election. Previous government measures such as the Help to Buy subsidy for first-time buyers have done little to ease the supply crisis, and have been blamed for forcing up prices.
Colin Stanbridge, LCCI chief executive, said: “Rising housing costs and the lack of affordable homes, either to rent or to own, within commutable distances of workplaces is generating pressure on employers to increase wages, leads to limited employee productivity and can often create challenges in recruiting and retaining staff.”
Local authorities are currently barred from borrowing and adding to government debt under the Housing Revenue Account Borrowing cap, but the LCCI calls for a relaxation of the borrowing ceiling in order to deliver greater numbers of new homes as well as estate regeneration.
Meanwhile, the Adam Smith Institute (ASI), a free market think tank, has called for the government to scrap stamp duty, claiming to do so would boost the mobility of labour across the UK as well as greasing the wheels of the housing market.
Stamp duty land tax is levied on all residential property transactions in the UK above £125,000, with a tiered tariff system above that value.
In a report published today the ASI’s head of research, Ben Southwood, will say the levy “gums up the housing market”, providing a disincentive for homeowners to move to more suitable properties.
The ASI suggests the government could make the abolition of stamp duty revenue-neutral by revaluing council tax and creating a new band for the most expensive homes.