London households are underpaying council tax and stamp duty by £3.1 billion relative to current home values due to valuations remaining frozen since 1991, according to a Resolution Foundation report released on September 23, 2026. The think tank urged Chancellor John Healey to reform housing taxes to restore regional fairness.
Regional Imbalances and the £3.1 Billion Subsidy
Housing taxes across England have grown increasingly skewed due to a failure to account for nearly four decades of house price growth, according to the Resolution Foundation’s report, titled Home Economics
. The analysis reveals that London households paid £3.1 billion less in council tax and stamp duty in 2024-25 than they would have if property levies reflected actual current home values. The think tank described the shortfall as a massive subsidy for Londoners that is ultimately paid for by households across the rest of England.
The current system leaves 80 percent of London households benefiting from lower relative tax bills, while taxpayers in other regions carry the burden. The North East bears the heaviest toll, with 85 percent of households on track to overpay relative to their property values by the 2030-31 financial year. By the end of the decade, the disparity means a person living in a £100,000 home could pay nearly three times as much tax relative to property value as someone occupying a £1,000,000 residence.
Political Pressure and Calls for Budget Reform
The Resolution Foundation blamed bad tax design and decades of political hesitation for the structural imbalance. Hannah Aldridge, who helped author the report, called on Chancellor John Healey to use the upcoming Budget next month to establish a sensible roadmap for reform and build an up-to-date database of property valuations. The think tank’s proposed overhaul includes moving to a proportional property tax system, reforming council tax, and abolishing stamp duty on primary residences.
Conservative shadow housing minister David Simmonds criticized the proposals, warning that they could prompt the PM to escalate what he termed a war on aspiration
. Simmonds pointed out that council tax is already projected to climb, hitting families across both the North and South. He added that a proportional property tax would likely eliminate single-person discounts and penalize homeowners who make improvements to their properties.
Labour are already hiking taxes on the family home, with council tax soaring by 18billion by 2030, hitting both North and South. Now their favourite think tank wants them to go even further with a tax raid targeted at London.
David Simmonds, Shadow housing minister
Mansion Tax Speculation and Potential South-East Impact
Debate over property levies coincides with mounting speculation that the Chancellor may lower the threshold for Labour’s proposed mansion tax to capture properties worth £1.5million or more during the Budget. Research indicates that lowering the threshold would disproportionately affect homes in London and the South-East, with roughly 80 percent of properties in those areas falling into the affected category.
Successive governments have avoided tackling the issue due to the fear of complaints from residents who benefit from the existing framework.