Capital Economics: Scrapping 3% stamp duty surcharge would create 900,000 new homes

Removing the 3% stamp duty surcharge would create almost 900,000 private rented homes across the UK in the next 10 years, according to economic consultancy Capital Economics.

This would also lead to a £10 billion boost to Treasury revenue over the same period.

The National Residential Landlords Association, which commissioned the research, called for Chancellor Rishi Sunak to adopt this proposal.

Ben Beadle, chief executive of the National Residential Landlords Association, said: “The Government needs to wake up to a crisis of its own making. Taxing landlords out of the market serves only to cut supply, increase rents and make home ownership more difficult to afford.

“The evidence clearly shows that the supply of rented housing is declining as demand increases and will continue to do so. The Government is taking a blinkered approach to the issue, which is not helped by its reluctance to admit mistakes it has made in the past.

“It makes no sense to tax the supply of new homes supplied by landlords investing in new build or bringing empty homes back into use. As this study indicates, removing the tax will actually generate more revenue, not less.”

Capital Economics warned that, if owner occupation and social housing continue at their 10-year average rate of growth, this would require a significant increase in the supply of private rented homes.

Almost 230,000 new homes would be needed in the sector each year if government ambitions for housing over the next decade are to be met.

Even if other housing tenures double their rate of growth, it would still mean over 100,000 new private rental homes a year will be needed over the same period.

Given that renting privately is the first housing tenure most young people enter when they leave home or university, demand will only increase as the 15-24 cohort in the population is forecast to grow between now and 2030 by 866,000 (11%).

Capital Economics suggests that without changes in tax or other policies, the private rented sector stock will decrease further by over half a million properties over the next decade.

Comments 1

  1. This surcharge was brought in to help first time buyers by discouraging people from buying second homes to enjoy for themselves or to rent out. It clearly has not worked, supply and demand rules the market. Undersupply means property is zooming in price well out of a typical first time buyers reach. Normally most people who are in a position to buy a second home can factor in the extra and in any case 3% is within the normal negotiating margins so maybe they can negotiate it away especially if they have cash and the vendor wants a quick sale.
    So the only people to actually benefit are the Government so they won’t scrap it. As for the conclusion that scrapping the surcharge would allow 100,000 more homes a year to be magically created, I just don’t get that at all. Does it assume that all the money saved on stamp duty on second house purchases would somehow go into a house building fund rather than stay in the buyer’s pockets?

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