The government could benefit to the tune of £10 billion and the rental market could have soaring supply if stamp duty was scrapped on the purchase of homes to let.

That’s the finding of economic consultancy Capital Economics which says removing the three per cent additional homes surcharge would see almost 900,000 new private rented homes made available across the UK over the next decade.

Due to increases in income and corporation tax receipts, the modelling suggests this would lead to a £10 billion boost to Treasury revenue over the same period.  

Also, Capital Economics notes that these revenue streams would continue over the decades that follow, so long as the landlords do not later sell all these properties.

The National Residential Landlords Association – which commissioned the research – is calling on the Chancellor to adopt this proposal amidst a chronic shortage of homes to rent.

Capital Economics has warned that, if owner occupation and social housing continue at their 10-year average rate of growth, this would require a significant increase in the supply of private rented homes. 

Almost 230,000 new homes would be needed in the sector each year if government ambitions for housing over the next decade are to be met.

The association says that even if other housing tenures double their rate of growth, it would still mean over 100,000 new private rental homes a year will be needed over the same period.  

Capital Economics suggests that without changes in tax or other policies, the private rented sector stock will decrease further by over half a million properties over the next decade.

Ben Beadle, NRLA chief executive, says: “The government needs to wake up to a crisis of its own making. Taxing landlords out of the market serves only to cut supply, increase rents and make home ownership more difficult to afford.

“The evidence clearly shows that the supply of rented housing is declining as demand increases and will continue to do so. The government is taking a blinkered approach to the issue, which is not helped by its reluctance to admit mistakes it has made in the past.

“It makes no sense to tax the supply of new homes supplied by landlords investing in new build or bringing empty homes back into use. As this study indicates, removing the tax will actually generate more revenue, not less.”