Home prices for those stepping on to the property ladder are likely to increase by as much as any saving made in stamp duty, according to the Treasury Select Committee.
It comes after the chancellor axed the levy for first-time buyers on the first £300,000 of any home costing up to £500,000 in the Autumn Budget.
The measure is expected to cost £3bn and only help 3,500 extra buyers into ownership, estimates from the Office for Budget Responsibility suggest.
The committee also recommended that the Local Authority Housing Revenue Account borrowing cap be scrapped to help meet the target of 300,000 new homes a year.
The cap was increased in the Budget, but still limits how much authorities can build, according to a report from the group of MPs.
Nicky Morgan, chair of the Treasury committee, said: “The Chancellor pledged to ‘fix the broken housing market’, but the Government is going to find it very difficult to meet this ambition.
“The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.
“The borrowing cap restricts the number of homes that local authorities could deliver.
“To achieve the Government target of 300,000 new homes per year, the cap should be abolished.
“The potential of local authorities to build should be unleashed.”
