Scrap stamp duty and council tax? Inside the thinktank plan to fix London's housing emergency

London's housing crisis is usually blamed on a simple lack of supply, but a new report from the Centre for London argues the real problem runs deeper, into how we tax homes. The thinktank's answer is radical: abolish both stamp duty and council tax, and replace them with an annual proportional property tax (PPT) levied on the value of the property. According to the report's authors, that single change would free up tens of thousands of homes each year, fund a major social housing programme and give renters a genuine route towards saving for a deposit.

The case for reform starts with a striking paradox. Average floor space per person in London rose by almost 30% between 2004 and 2023, yet that extra space went overwhelmingly to the wealthiest. Households in the top 20% of incomes saw the space they own increase by 27%, while the bottom 40% gained just 6%. So despite there being more housing available per head than two decades ago, inequality has widened rather than narrowed. The tax system, the report suggests, is part of the reason: stamp duty discourages moving, and council tax encourages people to hold on to large properties rather than downsize.

The wider picture the report paints is bleak by any measure. Homelessness costs the capital £5.5m a day, and record numbers of Londoners are living in temporary accommodation. House prices now stand at 12 times earnings, up from seven in the early 2000s, and a third of children live in poverty once housing costs are counted. Businesses, too, complain that unaffordable housing is choking growth, investment and their ability to attract talent. As Rob Anderson, the Centre for London's director of research and co-author of the report, put it: by every metric that matters, the crisis is at its worst.

Under the proposed PPT, tax would be calculated as a percentage of a home's value, with the burden rising for the most expensive properties. Homes worth up to £800,000 would pay an average base rate of 0.39%, with additional increments on higher-value homes rising to 0.82% on a £5m property. The report models the effects: a £500,000 band D home in Greenwich would pay £1,950 a year and save £15,302 over a decade compared with council tax and stamp duty, while a £5m band H home in Westminster would pay £41,000 a year yet still save £86,792 over ten years. The thinktank estimates the reform could fund 106,000 social and affordable homes over the next decade.

The winners under the scheme would be renters and first-time buyers. With council tax abolished, private and social renters would save the typical renter more than £1,890 a year, money that could go towards a deposit. First-time buyers, freed from stamp duty, would save £8,593 across their first five years of ownership. That matters in a city where the average deposit for those buying without family help reached almost £150,000 in 2024, and where prices have risen more than 200% since 2002.

The report is careful to anticipate objections, particularly from older or asset-rich homeowners on modest incomes who might struggle with an annual tax on a valuable property. Such households, including downsizers whose homes have surged in value, could defer the switch to PPT for up to a decade, staying on council tax with the balance payable when the property is sold. Anderson also stresses that scrapping stamp duty on ordinary movers alone would release an extra 79,000 homes a year, while still raising funds for social and affordable housing investment.

Perhaps the most important point in the report is that building alone will not solve the problem. Anderson accepts that London can and must build more homes, but warns that if policy focuses only on headline supply numbers and delivery targets, it risks missing the real issue: a housing system that is not delivering enough homes overall, and one in which the existing stock is badly distributed. Reforming property taxation, on this view, is as essential as construction.

For readers, the implications are worth watching closely. Renters in London would be among the clearest beneficiaries if council tax disappeared, and aspiring buyers would find the deposit mountain slightly less daunting. Downsizers would face fewer barriers to freeing up family-sized homes, while owners of the most valuable properties would pay substantially more each year. Whether any government has the appetite for such a sweeping reform remains to be seen, but the report makes a compelling argument that the current system is actively working against the people London's housing market is failing most.