Thursday 13 February 2020 4:30 am

Want to encourage downsizing and free up the housing market? Reform stamp duty

John Tonkiss is the chief executive of McCarthy & Stone
Chief executive, McCarthy & Stone

With the first post-Brexit Budget fast approaching, there are huge hopes, expectations, and indeed demands across industries and sectors — but perhaps few areas are more important than solving the housing crisis.

As Boris Johnson’s team focuses on delivering their manifesto promises, including building 300,000 homes a year by the mid-2020s, it’s worth remembering that we can’t just build our way out of trouble.

Read more: Boris Johnson and Sajid Javid weighing up a mansion tax

Solving the housing crisis also requires a cultural shift. As a country, we need to make better use of our existing housing stock.

In a recent report, The Last Time Buyer, Professor Les Mayhew of CASS business school points out that there are 28.3m housing units in the UK, compared with demand from 27.4m households, with the gap accounted for by second homes and vacant properties.

Our own research shows that two thirds of homes owned by over-65s have two unused bedrooms. With an ageing population and the size of the average household falling, we believe that more should be done to help those who want to downsize — not only because better-suited housing for older people improves wellbeing, but also because it would free up homes for first-time buyers and young families.

But when you’ve lived in a home for 40 years or more, where you’ve raised your family, it is difficult to make the change, particularly when faced with high moving costs and few alternative options.

So we are calling on the government to use the Budget to address this issue by reforming stamp duty. Doing so would not only encourage people to move to the right accommodation, it would also encourage the building of new types of housing — from retirement communities to bungalows.

A recent YouGov survey found that 33 per cent of older people — around four million individuals — would be interested in moving if the right options were available. More than half agree that stamp duty is putting older people off moving.

Crucially, 56 per cent feel that encouraging people to downsize with a stamp duty exemption would be beneficial to young people.

This kind of “Help to Move” package could also boost Treasury coffers from the extra tax taken in creating new housing chains, and release more than £360bn in housing equity.

We urge the chancellor to consider the Conservatives’ pre-election pledge to remove stamp duty from all house sales under £500,000. This alone would be a significant boost, as the vast majority of retirement properties built in the UK are below this threshold.

Alternatively, the government could remove stamp duty from all retirement properties to encourage this important form of housing. Either way, such reforms would undoubtedly unlock more housing supply for people on every step of the ladder.

Read more: General Election 2019: Tories to up stamp duty for non-UK residents

Reforming stamp duty would be quite the statement of intent from a new chancellor, and would help show that the government wants to make good on promises to address the housing crisis.

It already recognises that changing stamp duty is part of the solution. The only question is how daring it is willing to be.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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