An inquiry into affordable homeownership by the Housing, Communities and Local Government (HCLG) Committee said this had a “strong bearing” on affordability.
The report said the tax put barriers in front of people wanting to buy a home, and although there was some relief for first-time buyers, it “reduces the affordability of homeownership, slows the property market, and ultimately damages the economy”.
It said that while stamp duty was a valuable source of revenue for the government, it needed reforming.
The Housing Committee called on the Treasury and Ministry of Housing, Communities & Local Government (MHCLG) to begin the process of reforming stamp duty and launch a consultation into alternatives to the tax.
Suggestions included a full replacement with a revenue-neutral alternative, a reduction in rates to stimulate transactions, an overhaul of banding thresholds to align better with house prices and remain relevant, and an update to reliefs to meet the government’s goals.
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It said any changes must be intended for the long term, and not a short-term fix that distorts market behaviour.
Overall, the Housing Committee said housing affordability was complicated, and there were no straightforward solutions.
Clarity around affordable housing
The report said that with no statutory definition of affordable housing, there were mixed opinions, and some housing was not truly affordable for people.
It asked the government to “clearly and officially” define affordable housing in a way that could be used for all purposes, not just as part of planning.
This should include local average income levels instead of local market house prices or rent. It should also consider the different challenges faced by people in various circumstances and locations.
It said shared ownership was useful for getting people onto the housing ladder, but was not always affordable over the long term.
The Housing Committee welcomed the government’s reforms to the scheme, but said it should not be the main form of affordable housing offered.
Regarding mortgage access, the committee recommended that the government work with lenders so that renters cannot be blocked from obtaining a mortgage when their rental payments consistently show that this would be higher than a mortgage repayment.
Make more use of empty homes
The report cited concerns that the government would not meet its aim of building one-and-a-half million homes by the end of Parliament and said that to show progress, annual homebuilding targets for each year should be published by the MHCLG.
It said this would allow for analysis and demonstrate how the government planned to ramp up building.
Further, it asked the MHCLG to write to the committee before summer recess and every six months thereafter, to show what was being done to increase homebuilding rates by developers, progress, and cooperation from the industry.
The report noted that there were hundreds of thousands of empty residential homes, many unoccupied for months or years.
The Housing Committee said bringing them back into use would benefit supply and the affordability of homeownership. It recommended making it easier for local councils to take control of empty homes and give them new options to recover long-term empty properties.
Owning a home is ‘a pipe dream’
Florence Eshalomi MP, chair of the HCLG Committee, said: “Rates of homeownership in England have declined over the last 20 years. For many people, and especially for those unable to draw upon the bank of Mum and Dad, the prospect of owning a home is little more than a pipe dream. No silver bullet exists, but the government can apply a range of supply- and demand-side measures to help people get on the property ladder.
“Progress on delivering the 1.5 million new homes in this Parliament is vital. Councils should also be empowered to play a greater role in housebuilding and given additional powers to bring empty and under-occupied homes back into residential use.
“Reform of stamp duty is necessary but, especially given the public finance implications, this cannot be done in isolation or without a credible alternative in place. We urge the Ministry of Housing, Communities, and Local Government and HM Treasury to consult on alternatives to stamp duty that can deliver long-term benefit and not a short-term fix, which only distorts the housing market and exacerbates the affordability problem”.
