A new report from Fairer Share and WPI Economics found that thousands of homes for first time buyers and young families would be freed up by scrapping council tax and reforming the property tax system.

Read the full report | Taxing Times: A fairer deal for future generations

The report reveals that bringing in a proportional property tax could release up to nearly 600,000 homes in total – including more than a quarter of a million one and two bedroom ‘starter homes’. 

In many cases, dwellings would be released by encouraging people to sell their second homes through higher taxation of these properties. 

The latest findings put further pressure on ministers to bring in a proportional property tax which is backed by think tanks including the Institute for Public Policy Research and the Centre for Policy Studies and by several Conservative and Labour MPs. The Ministry of Housing, Communities and Local Government Select Committee has also urged the Government to consider PPT as an option for wider reform of council tax.

Campaigners are calling for the abolition of council tax, stamp duty and the bedroom tax and the introduction of a PPT set at a flat rate of 0.48% of a property’s value. The policy would mean higher bills for second home owners but lower bills for 76% of households in England.

The new report by WPI Economics considers how many homes would be released as a result of increased transactions brought about by PPT. It also estimates how many dwellings would be released thanks to more second homes becoming available, empty homes becoming easier to sell and more homes being built sooner.

Under the most pessimistic assumptions, 175,000 homes would be freed up over the five years after PPT was introduced. In the most optimistic assumption some 595,000 homes would be released throughout England.

Within this figure, it is estimated that there would be 255,000 one and two bed homes for first-time buyers and a further 249,000 three bed homes for young families to move into.

Top 10 local authorities with most homes released after introducing proportional property tax:

  1. Cornwall UA – 15,057 homes released
  2. Birmingham – 9,021
  3. Leeds – 7,694
  4. Bournemouth, Christchurch and Poole – 7,386
  5. Dorset UA –  7,341
  6. Manchester – 7,073
  7. Bradford – 6,261
  8. Tower Hamlets – 5,967
  9. Durham UA – 5,962
  10. Northumberland UA – 5,945

In London, up to 47,000 one and two bed starter homes would be released – more than any other part of the country. There would also be up to 32,000 larger homes freed up in the capital.

Across England, Cornwall emerges as the local authority area in which most homes would be released with the figure standing at 15,057. This is in part due to the high number of second homes in Cornwall that would be released on to the market as primary residences under PPT.

Andrew Dixon, chairman of Fairer Share, said:

“By sticking with the current unjust and outdated council tax regime, ministers are effectively sticking two fingers up at young people in this country. 

“Scrapping council tax and implementing a proportional property tax would not only deliver lower bills for most households, while reducing them to zero for renters. Our report shows it would also pave the way for the release of many thousands of extra homes for young people and families who need them.”

“If the Prime Minister really believes in levelling up then he should prove it by making property taxes fairer for everyone. The reality is that the levelling up agenda is doomed to fail without a fundamental reform of the property tax system.”

Simon Fell, Consevative MP for Barrow & Furness said:

“The current system of council tax is outdated and unfair. Introducing a simpler and fairer property tax system could reap huge benefits for millions of people across the country making it transparent and fairer for all, and especially lifting a disproportionate burden from the young. As we look to level up across the UK, I can think of a few measures that would better demonstrate to people that this government is determined to deliver on its promises to people who lent us their vote in 2019.”

Rt Hon John McDonnell, Labour MP for Hayes & Harlington and former Shadow Chancellor of the Exchequer said: 

“Analysis from the Fairer Share campaign shows that moving to a proportional property tax would not just mean lower bills for most households, it would also free up thousands of homes for people who need them.“

Lord Willetts, Conservative peer and president of Resolution Foundation’s intergenerational Centre, said:

“The cost of housing is holding back the younger generation. We need to get more housing onto the market for them. A Proportional Property Tax is key to this. It would replace council tax which has become increasingly regressive and is particularly hard on young people. I welcome this important report.”