Labour is calling on chancellor Rishi Sunak to reverse a £1.3bn “bung” to second homeowners and landlords which could save them £15,000 when buying a holiday home or buy-to-let property.
The party’s shadow housing secretary Thangam Debbonaire said that cash from the move — which was not mentioned in Mr Sunak’s emergency financial statement to the Commons on Wednesday — would be enough to fill the immediate gap in funding for local councils reeling from the impact of lost revenues and extra demands because of the pandemic.
She has written to housing secretary Robert Jenrick urging him to persuade the chancellor that a tax break for second homeowners was not an appropriate use of money at a time when millions are going through financial hardship.
The Labour protest came as the Institute for Fiscal Studies think tank warned that first-time buyers, who have always been exempt from stamp duty up to £300,000, could be left worse off as the influx of buyers encouraged to enter the market by Mr Sunak’s move drives up prices.
Under stamp duty rules, second home-purchasers pay a 3 per cent surcharge on top of the standard rates paid by all domestic property buyers, which until Wednesday were 0 per cent up to £125,000, 2 per cent on the portion of the price between £125,000 and £250,000 and 5 per cent between £250,000 and £925,000.
Mr Sunak’s stamp duty holiday introduces a zero rate for the whole value of the property up to half a million pounds in England and Northern Ireland until the end of March next year, worth £4,600 to the average home-buyer and £15,000 on homes worth £500,000 or more. The chancellor said it would “catalyse the housing market and boost confidence” as part of a bid to drive growth and create jobs.
But documents released by the Treasury following Mr Sunak’s statement revealed that second home-buyers too will benefit from the move, paying just 3 per cent on the first £500,000 of their purchase, rather than as much as 8 per cent under the previous rates.
Property investment consultancy Buy Association said that the cut “will certainly bring a swathe of previously hesitant buyers to the fore” in the second home and buy-to-let markets, adding: “While some investors have been waiting to see what happens with property prices, tax savings could prompt them to take action sooner.”
With second homes accounting for as many as a third (34 per cent) of all homes bought in 2019-20, Labour calculated that the move could cost the Treasury £1.3bn in lost revenues.
Ms Debbonaire said: “It is unacceptable that the chancellor tried to sneak out this huge bung to second homeowners and landlords while many are desperate for support. He should be targeting support to those who need it, not helping people invest in buy-to-let properties and holiday homes.
“An unnecessary subsidy for second homeowners will only worsen the housing crisis by reducing the supply of homes overall.
“We need a credible plan from Tory ministers to build the homes our country needs and get people onto the housing ladder. We didn’t see that this week.”
A Treasury spokesperson said Mr Sunak was moving to revive the housing market after HM Revenue and Customs figures showed sales in May were 49.6 per cent lower than in the same month last year.
“The housing market has been hit hard by the outbreak with 175,000 missing sales — so we are doing everything we can to get the country moving again,” said the spokesperson.
“Our cut in stamp duty will help drive growth and support jobs across the housebuilding and property sectors.
“Those buying second homes or buy-to-let properties will continue to pay an additional 3 per cent on top of the standard SDLT [stamp duty land tax] rates.”
Conservative co-chair Amanda Milling said: “It beggars belief that Labour is against plans to help thousands of families across the country. Our plans mean 90 per cent of people getting on or moving up the property ladder will pay no stamp duty at all.
“Sir Keir Starmer’s Labour will turn whichever way the wind blows. They say different things from one day to the next to try and score political points and chase headlines.”