6 Sep 2019
I live in the epitome of Suburbia. If it was a sit-com, I would be Terry to my wife’s June, Jerry, to her Margo. Suburbia is changing, however, and not for the better. There is a boom in Velux windows. Loft extensions are in vogue. Some homes are going through almost full demolition and rebuild. Gardens are making way for garden extensions. Garages, for playrooms. Aesthetically, a pretty street that was designed in the 1930s with love and attention, is becoming something akin to Dr Frankenstein’s Monster, with various new parts being grafted on to homes. One house has had so many extensions added that it soon will be akin to a small budget hotel in size and demeanour.
Schools policy explains part of this; once parents have bagged a home in a good catchment area they don’t want to move. But even within the same catchment area, people are rarely moving, and the main culprit is stamp duty land tax (SDLT). A family house in our area will easily cost £550k to purchase and therefore come with an SDLT bill of £34k. The economics of moving simply do not stack up, and so families don’t. The result is little movement in the housing market. Third steppers add value and extend, rather than move. Second steppers don’t step because there is nothing to step up to. And, ideal starter homes are still occupied by second steppers.
Solutions are therefore up for discussion, despite the Chancellor having mooted moving SDLT to a sales tax, rather than a purchase tax, and then as quickly withdrawing that idea was ever his, or on his agenda in the first place. So, in that spirit, what other reforms could unblock our bunged up housing market?
Given the significant variation in house prices across the country and impact on different generations it is difficult to propose changes that avoid being unduly regressive, or hit/boost particular generations. There are of course reliefs already, which seek to help those just finding their feet on the housing ladder, with the first £300k SDLT free and a lower rate up to £500k for first time buyers. Helping downsizers has its advocates, but we have always been careful of policies that spare those who are downsizing, out of sympathy for those who may not even have their foot on the first rung of the housing ladder. In tough times there has always been more pressing priorities. Something like a net SDLT system, however, may be more palatable, because it is not targeting just downsizers (though undoubtedly they would be a major beneficiary), but applies to everyone.
All of these ideas increase the complexity of the SDLT system and we have long been advocates for a simpler system. However, the importance of a well-functioning and liquid housing market is probably more important that the need for simplicity. There is of course another simple solution, which is to support peoples’ aspirations by cutting SDLT rates or changing the current thresholds!