Boris Johnson is to call for George Osborne to hand over tax revenues from London property sales to ease a shortage of affordable housing in the capital.
The London mayor is making a fresh bid to wrest control of stamp duty land tax – amounting to £1.3bn a year – from the chancellor’s grip, as the city confronts soaring house prices and a rapidly growing population.
Mr Johnson said: “If we do not come up with a new plan to build the homes we need, this great city will stagnate and the whole country will suffer the consequences.”
Hiving off London’s portion of receipts from stamp duty – which accounts for about one-third of the total for England and Wales – would allow the mayor not only to fund housing and regeneration but to use this stable revenue stream to borrow in the capital markets, according to City Hall.
Richard Blakeway, deputy mayor for housing, said the money might also be used in other ways, from offering indemnity insurance on construction projects to long-term funding commitments for regeneration schemes.
The Financial Times revealed in October that Mr Johnson had written to the chancellor about the stamp duty proposal, arguing that London needed powers to match those already in the pipeline for Scotland. The Treasury described the proposal as “an interesting idea”.
In his first public endorsement of the plan in a speech to be delivered to the Chartered Institute of Housing on Wednesday night, Mr Johnson is expected to say he would push for London boroughs to have more powers to build homes and raise their borrowing limits for development.
The mayor argues that stamp duty is becoming a London tax, with the lion’s share of higher-rate duty paid in the capital. The average price of property in London is £371,223 – attracting stamp duty of 3 per cent – compared with an average of £162,080 elsewhere in England and Wales, payable at 1 per cent.
City Hall officials are confident the mayor will fulfil his campaign pledge of building 55,000 affordable homes by 2015, although data showed construction began on just 425 homes between April and September last year.
Recent census figures showed London’s homes are becoming more overcrowded while those in the rest of the country are more sparsely occupied.
Average households in the city increased from 2.35 people in 2001 to 2.47 people 10 years later, while the average for England and Wales excluding London fell from 2.36 people to 2.34.
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