Landlords and Second-Home Buyers Driving Majority of Stamp Duty Revenues

Why It Matters

The growing reliance on landlord and second‑home purchases makes Stamp Duty revenue vulnerable to policy changes and could exacerbate regional housing affordability gaps, especially in the south.

Key Takeaways

• HRAD transactions now generate ≥50% of Stamp Duty in 164 English councils.
• HRAD share rose from 22% (2016/17) to 56% (2024/25) in councils.
• Northern regions see >80% HRAD dependence; southern areas lag behind.
• Surcharge increase to 5% may push investors toward cheaper northern markets.
• Reliance on landlords risks two‑tier market and rental price pressure.

Pulse Analysis

The UK’s Stamp Duty landscape has shifted dramatically since the 3% higher‑rate additional dwelling (HRAD) surcharge was introduced in 2016. Originally intended as a cooling measure for buy‑to‑let and second‑home demand, the levy now accounts for a substantial portion of local authority revenues. Paragon Bank’s recent data reveal that 164 councils—more than half of England’s jurisdictions—receive at least half of their Stamp Duty from HRAD transactions, a stark rise from just 62 councils a decade ago. This trend underscores how the surcharge has become a fiscal mainstay rather than a temporary deterrent.

Geographically, the burden falls heavily on northern and mid‑land regions. Authorities such as Kingston upon Hull (97% HRAD share) and Sandwell (92%) illustrate the concentration of revenue from additional‑property purchases. In contrast, southern areas like the South East and East of England see only about a third of councils crossing the 50% threshold. The 2024 budget’s increase to a 5% surcharge appears to be nudging investors toward cheaper northern markets, reinforcing existing regional imbalances. This migration could depress property values in the south while inflating rental demand and prices in the north, potentially creating a two‑tier housing market.

For policymakers, the data signal a double‑edged sword. While HRAD receipts bolster local budgets, over‑reliance on landlord activity makes revenue streams sensitive to future tax reforms or market slowdowns. Moreover, the concentration of buy‑to‑let investment in specific regions may strain rental supply, driving up rents and limiting homeownership opportunities. Balancing fiscal needs with housing affordability will likely require nuanced adjustments—perhaps targeted relief for first‑time buyers or incentives to diversify investment across regions—to avoid entrenching the emerging north‑south divide.