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The UK’s housing market is a shambles. Young people still really want to get on the housing ladder and most can’t. Rents charged by landlords from their parents’ generation, the “buy to let” generation, add to their burdens.

Of course, fundamentally this is a supply side issue. The country’s widening demand/supply imbalance, which has gone on for a generation, is why prices are so high. Sorting out this imbalance will inevitably take years, decades.

Part of the supply side could be answered if existing housing were better distributed. Perhaps the greatest impediment to a more dynamic, liquid housing market is the glue known as Stamp Duty Land Tax. Stamp duty is suffocating the market.
LSE report image

Download the report here
  • In addition to the burden of saving a deposit, first time buyers now have to find many thousands of pounds in stamp duty, a much greater amount, proportional to after-tax income, than past generations faced.

  • Potential downsizers resent paying huge sums to HRMC to move. They can’t buy something that costs the same as their original house without spending money on the tax—but can stay where they are for nothing.

  • As they are not likely to move significant distances, any offset from increases in value over time are likely to be minor. If you are going to spend on a tax why not spend on a new kitchen instead?

  • Equally some may want to move to smaller but similarly priced properties for reasons of convenience or particular facilities. The cost of stamp duty would then become a significant factor in their decision to move or stay where they are.

  • Families that want to move decide to extend properties rather than pay a new tax.

  • Stamp duty can also be an impediment to social mobility. Why move for a job that might not last, or may be just a short-term career stepping stone, and incur huge expense? Or, if they do move jobs, many people end up with longer commutes, with the result stress on the transport network and themselves. This adds the economic and productivity challenge facing the country.

One answer would be for the government to cut some people a break – downsizers, family formers or job movers. Better still the government could cut rates for all buyers—or even do away with the tax entirely.

These are big issues and will stimulate much debate. That’s what this report is intended to do. And the most powerful voices in it are real customers of the Family Building Society. Their words are in this report, and you can download it here.

The next question must be “Is anyone in government really listening? 

Family Building Society Stamp Duty Research with LSE   


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