Stamp duty causes problems at both ends of the housing ladder

A recent report by the London School of Economics and the VATT Institute for Economic Research[i] highlights that stamp duty is making the housing crisis worse as it’s deterring many older home owners from downsizing. The report suggests that the rate of home moving would be 27 per cent higher if stamp duty was abolished.

A new report from house builders McCarthy & Stone[ii] reveals almost half (48 per cent) of over 65s would consider downsizing, especially if they were exempt from stamp duty. We agree.

The current level of stamp duty is causing problems for all generations – the young families that need extra space but can’t afford to move, and the older generation that want to downsize to a property more suitable for their needs but are finding it harder to find a buyer.

House prices have risen substantially over the past two decades, even a smaller home can come with a hefty stamp duty levy especially in popular retirement places, such as the south coast of England.

This can deter older people who are on limited incomes from moving and they essentially end up living in homes that are too big for them to maintain, with all the associated worry of property and garden upkeep.

We believe something urgently needs to be done to improve this situation so that stamp duty is not a hindrance to housing mobility. Older people should to be able to move on when they need to. The added benefit of removing stamp duty for older people is that this would unlock a stagnating property market, free up under-occupied property and provide much needed housing stock for younger generations.

One solution for older people keen to downsize is to rent a purpose-built retirement property. In our experience growing numbers of older people are choosing this option.

Whilst initially renting may not appear an attractive option for someone who has owned their own home, we find that it’s often the security of tenure which is the main stumbling block. However, this isn’t an issue when choosing to rent a retirement property through Girlings as many properties are available to rent on an assured tenancy, which means people can live in the property for as long as they wish. This provides older people with the same security and peace of mind as if they were owning their own home, but they haven’t had to pay the additional stamp duty to be able to downsize to a suitable property.

Other benefits that come from renting in retirement include freeing up capital to fund retirement; gift money to children; no longer having to deal with the upkeep of a property, which can become harder as people get older and access to a ready-made community. Additional services such as a 24-hour emergency call line in every apartment are also beneficial as people get older.

We believe that the issues surrounding stamp duty need to be addressed today so that people, at both ends of the housing ladder, have the financial incentive to move on; if not we fear the housing crisis will worsen in generations to come.



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