Rachel Reeves wants first-time buyers in London to pay £6,000 more. It's a punishment for the young

Labour swept to power promising to make housing more affordable. But now, chancellor Rachel Reeves is planning a tax rise which could make buying your first home in London over £6,000 more expensive. 

In her imminent budget, the first Labour budget in 14 years, reports suggest Reeves will reduce the threshold for buyers to pay stamp duty. From April, the threshold for first-time buyers will go down from £425,000 to £300,000.

With the average first-time property in London costing £480,000, and young buyers in the capital already stretching to afford their way out of renting, the move will see them hit with a hefty extra bill which could price them out of home ownership. It’s fundamentally unfair on the young people at the sharp end of the housing crisis. Here’s why.

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Stamp duty (SDLT as it’s known by experts) is a tax on property purchases, often at over 10% of the value of the purchase. Although it is very efficiently collected – through solicitors – it has many damaging effects for younger generations.

It discourages moving so that growing families find it much more expensive to buy the larger spaces they need, and it also makes relocation more challenging, leading to more commuting for working people.

The stamp duty tax penalty for moving also affects older homeowners, so-called “last-time movers”. The result is that older people are less likely to downsize and they end up sitting on housing they don’t need – often for decades. This is also squeezing younger people out of owning family homes.

Stamp duty charges means that younger people have to save more in order to become home-owners in the first place, and young families have to find more money to move up the property ladder.

Rumours that the chancellor, Rachel Reeves, might add further costs to buyers, who tend to be younger, by lowering the threshold at which stamp duty falls due, have a strong whiff of intergenerational unfairness. 

She would be better advised to look at the large tax-free windfall gains that older generations have made on their houses. This should lead a chancellor who is strapped for cash to introduce a property tax based on the value of people’s homes. That could either be done through a new tax or, more simply, by making the council tax system more progressive and chargeable to the property owner.

Reducing SDLT and raising property taxes on larger homes would be fairer on young people who are working hard to get a fraction of the advantages that older generations have had. Echoing Harold Macmillan’s phrase from 1957, you might now say that “young people have never had it so bad”.

Angus Hanton is co-founder of the Intergenerational Foundation think tank.

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