Politicians demand major stamp duty reform to tackle housing crisis

A committee of MPs has called on the government to overhaul stamp duty, arguing that the current system poses a significant barrier to homeownership and is stifling the property market. The call for reform aims to help more people in England and Northern Ireland get on the property ladder.

The Housing, Communities and Local Government Committee has recommended launching a consultation by the end of 2026 to explore potential alternatives. Their report highlighted a stark reality: “Decades of skyrocketing house prices, slow wage growth and unnecessary market barriers have contributed to the deterioration in the affordability of homeownership in the UK.”

The committee’s report criticized stamp duty for “putting up barriers to those looking to buy a new home” and argued that it “reduces the affordability of home ownership, slows down the property market and ultimately harms the economy”. It comes as the “zero rate” threshold for first-time home buyers will drop from £425,000 to £300,000 from April 2025, and the zero rate threshold for house movers will be halved from £250,000 to £125,000.

These impending changes have led to a rush of buyers to complete deals, particularly in areas such as London and the south-east of England, where high house prices mean buyers face particularly high stamp duty costs, making it even more difficult to get onto the housing ladder.

Recognizing that stamp duty was “a valuable source of revenue for the public exchequer”, the committee insisted that it “should not be maintained in its present form and should be reformed”.

The proposed consultation on alternatives should consider important factors, including their revenue-raising power, impact on property market frictions, progress and overall fairness.

Potential options to consider could include replacing the tax altogether, lowering rates to encourage sales, overhauling band thresholds to bring them more in line with local property prices, and updating existing discounts and exemptions.

MPs also called for stamp duty reform to be supported by an overhaul of council tax. They also suggested that councils be empowered to more easily take back long-term vacant properties within local authorities.

This could be achieved by the government clarifying councils’ existing powers and introducing new options for saving long-empty homes. The report also highlighted the important role of family support, often referred to as “mum and dad’s bank” in the current housing market for first-time homebuyers, emphasizing that “more needs to be done to ensure that everyone, regardless of family background, has a fair chance of buying a home if they want to.”

Underlining the urgency of the situation, committee chair Florence Eshalomi said: “Home ownership rates in the UK have fallen over the last 20 years. For many people, especially those who do not have the benefit of parents’ savings, the prospect of owning a home is little more than a pipe dream.”

He added that while “there is no magic solution” the government should implement “a range of supply and demand side measures to help people get on the property ladder”. He also stressed that “it is vital that progress is made in delivering 1.5 million new homes in this Parliament”.

Ms Eshalomi also stressed that “Councils should be empowered to play a greater role in house building and given additional powers to bring empty and underused homes back into residential use.”

The committee pressed for the publication of annual housebuilding targets for each remaining year of Parliament and for biennial updates on government actions to increase private builder rates. They welcomed plans for a new homeownership-focused product to replace the Lifetime ISA, but warned against the addition of a static property price cap that could make the product “unusable” in certain geographical locations.

The report acknowledged that there were “no easy solutions” to home ownership problems but concluded that “increasing the supply of homes by encouraging home building is a vitally important component and the Government is right to prioritize this, working with builders, developers and especially local government bodies.”

Ms Eshalomi concluded: “Reforming stamp duty is necessary, but this cannot be done alone or without a credible alternative being available, especially given the public finance implications. We call on the Department for Housing, Communities and Local Government and HM Treasury to consult on stamp duty alternatives that could deliver long-term benefits, not just a short-term fix that distorts the housing market and worsens the affordability problem.”

A Treasury spokesman responded to the committee’s findings by saying: “First-time buyers do not pay stamp duty on homes worth up to £300,000 and can claim discounts on purchases of up to £500,000. We are saving an average of £710 for first-time buyers, while cutting weeks off the buying process.”

Henry Jordan, group director of mortgages at the Nationwide Building Society, backed a wider review of property tax. He said: “Any review must include all property taxes to create a system that is more progressive, encourages more efficient use of housing stock, and takes into account people’s ability to pay, allowing people to move into their homes more easily.”