The government’s recently-launched flagship housing policy to get ‘Britain building’ has been heavily criticised by senior MPs today, including members of May’s own party, and also that the Stamp Duty changes for first time buyers will “distort” the property market.
The Treasury Select Committee believes both the abolition of Stamp Duty for properties bought by first-time buyers worth up to £300,000, and the easing of the local council borrowing cap to build homes, do not go far enough and will not achieve the 300,00-a-year new homes a year the government thinks it will.
The Committee also says the Stamp Duty will create a ‘cliff edge’ at the £500,000 price point because the new rules enable the duty to be avoided by first time buyers on properties up to that value, although only on the first £300,000.
“A house worth £500,000 will attract £5,000 less in SDLT than a house worth £500,001,” the Committee report says.
Housing cliff edge
“When the previous Government redesigned [Stamp Duty] to remove ‘cliff edges’ faced at certain property values, the then Chancellor said that he had reformed a ‘badly designed system that has distorted our housing market for decades’.
“It is regrettable that the abolition of SDLT for first-time buyers reintroduces a cliff edge into the SDLT schedule.”
The committee also endorsed a recent Office for Budget Responsibility statement that the Stamp Duty changes would only enable an extra 3,500 first time buyers to get on the property ladder.
“In isolation, the reduction in stamp duty is likely to increase prices for first-time buyers by as much, if not more, than the amount they save as a reduction in stamp duty,” the OBR report said.
Also, the reduced borrowing cap for local councils, to enable them to build more homes and introduced by Phillip Hammond during his November Budget speech, is also criticised by the committee.
“The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough,” said Conservative MP and Treasury Committee chair Nicky Morgan (pictured, left).