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Scrap Stamp Duty for pensioners to make downsizing worthwhile

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Government should introduce exemptions on Stamp Duty liabilities for ageing baby boomers to encourage them to move home. This would make downsizing a more viable option for baby boomer homeowners and free up more family homes for younger generations.

Policy Exchange’s new report, Building for the Baby Boomers, shows that:

  • Potential equity release from downsizing by one bedroom is high in London Boroughs and wealthy parts of the South East, but relatively low in other parts of the country. This means that at the moment downsizing simply does not stack up financially for too many older homeowners.
  • 1.1 million homes in England with two or more spare bedrooms are lived in by one person aged 65 or over living alone – one fifth of all homes that are under-occupied.
  • The biggest supply of under-occupied homes lived in by older people is in rural areas like Somerset and Dorset, while the areas where rates of under-occupancy by older households are lowest are all in Central London.
  • Policy Exchange recommends that Government scraps the 2 percent Stamp Duty band – which is levied on those buying homes between £125,000 and £250,000 – for older homeowners looking to move home, which would generate extra tax revenue. Last year the Government scrapped Stamp Duty Land Tax for first-time buyers on home purchases of up to £500,000.

The report argues Stamp Duty exemptions should be introduced alongside a Government drive to build a new generation of homes purpose built for ageing baby boomers.  It says increasing older people’s choice in the housing market should be a more central feature of Government’s housing strategy. This would allow more baby boomers to move into homes fit for their retirement, releasing family homes onto local housing markets; and give more baby boomers the chance to access housing wealth they have stored up in spare bedrooms.

The report’s other key recommendations include:

  • Government should aim for a significant increase in the number of new retirement homes specifically aimed at older people every year and therefore needs a legal and regulatory platform which enables new models of retirement housing, a new tier of innovative providers to emerge and an intermediate market to develop.
  • Across all tenures, the retirement housing sector must be made a more desirable choice to the baby boomer generation. Essential to this is a stronger emphasis on building retirement homes that are built in designs and styles popular with older people. Public polling prepared by Deltapoll for Policy Exchange found that older people overwhelmingly want a sense of belonging and pride from the look and feel of homes and buildings in their area. They want homes that are energy-efficient, built-to-last and which fit in with other local buildings.
  • The planning system should be used as a vehicle to encourage new models for retirement housing. Local authorities should be encouraged to review the need for specialist housing for older people across all tenures and to waive planning obligations (including Section 106 contributions) when a development provides a suitable amount of housing for the intermediate retirement market
  • There is a widespread perception that local authorities face a financial disincentive when the number of older people living in their area increases, which discourages them from approving new retirement housing schemes. Government should consider whether this is accounted for in the needs formulae for assessing social care funding.
  • More consideration should be given to how older renters without adequate retirement savings are supported by the state in later life including whether a new sub-market rental or shared ownership tenure specific to older renters can be supported by government.
  • Government and local authorities should look to attract more institutional investment into the retirement housing sector directed towards private rental housing.



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