Stamp Duty wrecking housing market, says lobby group

The cost of Stamp Duty Land Tax is strangling the housing market, a lobbying group has said.

It is calling for buy-to-let investors to pay more, allowing Stamp Duty rates to be slashed for people buying for their own occupation.

The HomeOwners Alliance has published a report called ‘Stamping on Aspiration: The Real Cost of Stamp Duty’. It says that the high cost is stopping first-time buyers from being able to get on the housing ladder, and preventing other people from moving.  Instead, they are building extensions, converting attics and digging out basements to give themselves more room.

It says the repeated ramping up of Stamp Duty since 2007 has been a major contributor to the decline of home ownership in recent years.

Stamp Duty, says the report, has risen 7.1 times faster than inflation, 6.5 times faster than average earnings and 4.6 times faster than house prices since 1995. The average Stamp Duty bill is now the equivalent of 11 weeks’ of average earnings: back in 1995, it was the equivalent of eight days of earnings.

The report also lays into the Government for having said that it will help home owners and discourage smoking and drinking. In practice, the Government’s own forecasts are that it expects to make as much money from Stamp Duty as from taxes on alcohol and tobacco by the year 2017.

Since 1997, home buyers have been hit by an increase in the number of Stamp Duty bands, from one to five, while the highest rate of Stamp Duty for individuals buying their homes has shot up from 1% to 7%.

Stamp Duty has also gone from being a tax that most home buyers did not have to pay to being a tax that most do have to pay. In 1992, 37% of properties were subject to Stamp Duty, but now 54% are.

Paula Higgins, a former civil servant who founded the HomeOwners Alliance, said: “The housing market is being choked by the rising cost of Stamp Duty. 

“The overwhelming majority of people want to own their own home, and the Government says it wants to help them. But the reality is that its ‘home tax’ is taxing their aspirations to death.

“With home ownership in historic decline – depriving five million people of the dream of owning the roof over their head – the Government should not be looking to home buyers to fill its deficits.”

The HomeOwners Alliance is calling for reforms, including raising Stamp Duty levels for buy-to-let investors and purchasers of second homes, and cutting it for those buying a home for their own occupation.

Higgins said: “It is very unfair that ordinary people pay the same tax to buy the roof over their head as investors do when expanding their property empire, or when people buy holiday homes they use only a few weeks of the year.”