London’s housing crisis could be resolved by replacing stamp duty with a new property wealth tax, a think tank has said. A report by the Centre for London suggested the annual tax to replace stamp duty and council tax would encourage downsizing and could help renters to save for a house deposit. It also stated such a policy change would raise funds for social housing, at a time when record number of Londoners are living in temporary accommodation. The research found that the housing inequality within the city has only worsened in the last 20 years, with average floor space for each person rising by almost 30 per cent - but this largely going to higher-income occupiers. While households in the top 20 per cent of incomes have seen a 27 per cent rise in space owned, the bottom 40 per cent has only seen an increase of 6 per cent. Meanwhile, house prices are 12 times earnings and have risen by more than 200 per cent since 2002. Businesses have also said that a lack of property affordability is damaging growth and investment. The leading think tank has called on the government to scrap stamp duty and council tax to improve the affordability of the housing market (Daniel Leal-Olivas/PA Archive) (PA Archive)The Centre of London has suggested radically changing the way in which homes are purchased by introducing an annual proportional property tax (PPT) that could then pay for 106,000 affordable homes over the coming decade.In order to benefit those with a lower income, the PPT would be calculated as a percentage of the value of the home, with an average base rate of 0.39 per cent applying on properties worth up to £800,000. For properties worth more than £1m, an additional 0.2 per cent increase is applied for every £200,000 up to a property value of £5m. This would mean a band D home in Greenwich worth £500,000 would have an annual PPT charge of £1,950, which would save more than £15,000 in the first 10 years. Under the proposed reforms, private and social renters would no longer pay council tax, which would save the typical renter £1,890 each year. This would allow renters to save for a deposit to become first-time buyers. Rob Anderson, the director of research at the Centre for London, said: “By every metric that matters, the housing crisis is at its worst. “It is widely acknowledged by economists and politicians from different parties that stamp duty has a disruptive effect on the housing market and both stamp duty and council tax act as an incentive to hold on to property. “Removing stamp duty on ordinary movers [owner-occupiers moving into their primary home] would release an extra 79,000 homes a year, while raising funds for investment into social and affordable housing.”