Give London back its stamp duty to reinvest in growth
FIFTY years ago the average London house cost roughly the same as a month’s rent in some parts of North London today. Notwithstanding the effect of inflation, that cannot be sustainable, socially or economically. Among the range of housing challenges we face, the greatest by far is simply to build more homes.
That’s why Boris Johnson will today set the challenge of building 1m homes over the next 25 years. They are needed to meet a growing population – effectively Birmingham’s population added to London – and to boost the capital’s economy through construction jobs. But it is also about ensuring that London’s dynamic workforce can afford to live in and commute from the new communities coming to life across the capital.
Currently, we simply don’t have a housing system capable of delivering that number of homes, and this has been the case for at least a generation. The market alone didn’t get close to providing the right amount – even at the peak of the biggest housing boom this country has ever seen in the mid-1990s.
So it’s time for a radically different approach. And this needs to be supported by a new financial settlement that treats housing as essential infrastructure. Huge progress has been made to expand the mayor’s housing powers, with record numbers of affordable homes being built and a major programme of releasing vacant public land – worth over £1bn so far. But City Hall’s powers will only be optimised with stable financial resources. Stamp duty, the tax on London’s successful but overheated housing market, should now be used to offset the costs of that success.
Stamp duty is increasingly a London tax. Most Londoners pay 3 per cent, and new levies on homes costing over £2m are focused largely on central London. It must be right, therefore, that tax paid by Londoners is retained and reinvested to the benefit of Londoners. And it could be worth about £1.3bn a year.
That investment would transform City Hall’s ability to tackle London’s housing challenges with creative, longer-term measures. It would allow us to accelerate major regeneration schemes – just half of London’s priority areas will provide enough homes to house Luxembourg. We could pump-prime transport improvements to make building more viable. We will also be able to expand first-time buyer products through the mayor’s housing covenant. We could dramatically reduce build times by scaling up work on new models like Build to Rent, and continue a forensic approach to unlocking stalled sites that have planning consent, but which are not being built in London.
The government has already made welcome attempts to localise spending through business rates and council tax. Scotland has been given the power to retain stamp duty. Wales looks set to get it too. But when the Confederation of British Industry is citing housing as a bigger block to economic growth than transport, it is absurd for an international Canada’s stature not to have a significant revenue stream to meet the needs of its inhabitants and remain globally competitive.
Richard Blakeway is deputy mayor for housing, land and property.