Older homeowners who downsize should be exempt from paying stamp duty while those who own a second home should be financially penalised in an overhaul to tackle Britain’s housing crisis, a study has concluded.

Oliver Wright www.thetimes.co.uk

The report, backed by Lord Heseltine and Lord Mandelson, also urged the government to review greenbelt boun­daries to free up land for development and force local authorities to plan for their future housing needs.

Academics at the London School of Economics and University of Sheffield also recommended a revaluation of council tax bands so that the bene­ficiaries of higher-priced properties would pay more to support social house­building.

Their conclusions are likely to be examined closely by senior figures in the Labour and the Conservative parties as housing moves up the political agenda before this year’s election.

The report, commissioned by the Family Building Society, said that tackling the housing shortage could not be dealt with by building more homes alone, pointing out that even a pro-development government would find it hard to add more than 1 per cent a year to the existing stock.

It said the UK had a vacancy rate of only 3 per cent — one of the lowest levels in the developed world — which was “inadequate” to allow normal turnover and mobility. This situation is likely to get worse with latest household projections for England suggesting that the number of households is set to increase by about 1.6 million over the next ten years.

That would mean even if the national target of 300,000 new homes being built each year was achieved, more than half of these additions would go to meet this increase, leaving relatively few to help reduce the backlog of the present unmet need.

In 2000 more than 70 per cent of households in England owned their home. In 2022, the figure was just over 64 per cent. That year fewer than 25 per cent of households aged under 35 were owner-occupiers compared with more than 50 per cent in 2001.

The report’s ­authors argued that much more needed to be done to use the UK’s existing housing stock more efficiently. They pointed out the discrepancy between older homeowners — sometimes living alone — in houses that are both too large and unsuitable to their needs.

But they said that at present there was too little to incentivise these people to downsize as they would incur both the cost of moving and paying stamp duty on their new home.

To remedy this, the report recommended that stamp duty should be waived for downsizing older homeowners, combining it with an emphasis on creating “retirement communities”, which could ease the moving process and help keep people healthier and connected.

It recommended a crackdown on second homeowners and the short-term Airbnb rental market, which it said distorted housing mar­kets, making it harder for local people to get on the ladder. It pointed to Wales where second homeowners faced paying up to three times the normal rate of council tax for a second property.

Mandelson said that facilitating downsizing would be a “far swifter way of easing some of the existing housing problems” than “headline-grabbing newbuild targets”.

He continued: “It can be done quite readily. Stamp duty land tax can be changed easily and its impact, as seen during the pandemic holiday, can be enormously beneficial in overall economic terms. It just requires a little ­creative thinking from the Treasury.”

Heseltine said the report should be “required reading” not only “for those with their hands on the levers of political power but also anyone interested in building a civilised society”.

Christine Whitehead, emeritus ­professor of housing economics at the London School of Economics, said the UK’s housing policy had suffered from a “mishmash” of initiatives. She said that successive governments’ focus on newbuilds would not on its own be enough to tackle the problem, which could be solved only through a range of ideas such as stamp duty reform and a crackdown on second homes.