London's housing crisis demands urgent action, and a leading thinktank has proposed a radical solution: scrapping stamp duty and council tax in favor of a new property wealth tax. This annual tax, known as the Proportional Property Tax (PPT), aims to address the city's housing disparities and provide much-needed relief for Londoners. The report by the Centre for London highlights a stark reality: despite an increase in available housing, London's housing inequality has widened. The average floor space per person has risen by nearly 30% since 2004, but this additional space disproportionately benefits higher-income owner-occupiers. The disparity is evident in the numbers: households in the top 20% of incomes have seen a 27% rise in owned space, while the bottom 40% have experienced only a 6% increase. This imbalance contributes to the city's housing crisis, with homelessness costing £5.5 million per day and record numbers of Londoners living in temporary accommodation. The report underscores the burden of high house prices, which are now 12 times earnings, up from seven in the early 2000s. A staggering one-third of children in London live in poverty after housing costs, and businesses are struggling due to the unaffordability of housing, hindering growth, investment, and talent retention. The proposed PPT system would revolutionize London's housing market. Homeowners with larger properties in more expensive areas would pay the highest taxes, calculated as a percentage of the home's value. For homes up to £800,000, a base rate of 0.39% would apply, rising to 0.01% for properties valued up to £999,999, and an additional 0.02% for homes over £1 million, with increments of £200,000. This system offers significant savings for homeowners, with a £500,000 home in Greenwich saving £15,302 over 10 years compared to council tax and stamp duty land tax (SDLT). A £5 million home in Westminster would save £86,792 over the same period. Private and social renters would no longer pay council tax, and first-time buyers would save £8,593 over five years of ownership. The PPT proposal also addresses the needs of asset-rich but cash-poor individuals, allowing them to defer the transition for up to a decade and continue with council tax. The Centre for London's research emphasizes the disruptive nature of stamp duty on the housing market, suggesting that its removal would release an additional 79,000 homes annually, providing much-needed funds for social and affordable housing. The abolition of council tax, pegged to 1991 values, would further alleviate financial burdens on renters, enabling them to save for a deposit on their first home. However, the thinktank acknowledges that building more homes is essential but argues that the housing crisis cannot be solved by simply increasing supply. The real issue lies in a housing system that fails to deliver enough homes overall. This proposal, while radical, offers a comprehensive approach to addressing London's housing crisis, and it is time for policymakers to take note and consider these innovative solutions.
