A House of Lords committee has called for the government to reform stamp duty because it has “seriously distorted the housing market”.
The committee on intergenerational fairness also recommended for the government allow local authorities to develop unused land owned by public sector bodies and give them greater freedom to borrow to build.
The committee report said: “The government should review the effect of stamp duty on the liquidity of the housing market and consider how stamp duty could be reformed to improve the housing choices and availability for young families.”
Lord True, the chair of the committee, added: “We found that intergenerational bonds are still strong, and the evidence suggested both young and older people recognise the contribution the other makes and the challenges they face.
“However, there is a risk that those connections could be undermined if the Government does not get a grip on key issues such as access to housing, secure employment and fairness in tax and benefits.”
The report also said that the government should ensure local authorities have specific planning policies to meet the housing needs of younger and older people.
The committee also found government reforms to the rented sector don’t do enough to provide tenants with long term secure tenancies, so recommended they should be backed up by a new regulatory framework.
Both John Phillips, group operations director at Just Mortgages and Spicerhaart and David Hollingworth, associate director of communications at L&C Mortgages, welcomed the report’s findings.
Hollingworth said: “Stamp duty comes up again and again and people point to how higher rates impact how the market performs.
“I think these recommendations show that people are talking about, both in terms of product innovation and the structural side of things with local authorities and the powers that be, making sure they deliver the right type of property for the right type of person.
“This is helpful, keeping it at the forefront of people’s minds. The more these issues are discussed, the more likely you’ll see concerted action.”
Phillips added: “Stamp duty tax makes up such a huge proportion of the cost of moving that many of those who want to upsize are choosing to extend instead, creating a plethora of houses all the same size and nothing in between.
“While at the other end of the scale, older people are staying put rather than paying to downsize and are being criticised for ‘taking up’ all the family homes.
“There is an argument that of course stamp duty brings in valuable income for public spending – about £8bn a year – which sounds like a lot. But what about the costs associated with people not moving because of stamp duty costs?
“For example, older people living in homes unsuitable for their needs which adds extra pressure to health and social services.
“I supported the cut in stamp duty for first-time buyers as it was a start, but said at the time, if you only help first-time buyers, property prices will be forced up as sellers try and add the money ‘saved’ onto asking prices, to help them cover their own stamp duty costs!
“And this is what we have seen, to some extent. In my opinion, stamp duty has a lot to answer for, so I welcome this report’s findings. Stamp duty is stifling the market and is long overdue a huge overhaul – ideally, it would be abolished altogether, but significant cuts would be a good start.”