Stamp duty should be cut for over-65s who want to move house for the last time to stop them clogging up the property market, a major study has said.
Older homeowners are contributing to the housing crisis by staying put in large properties, according to the report by Cass Business School and the Centre for the Study of Financial Innovations – with 15 million "surplus" bedrooms in under-occupied homes.
This will rise to 20 million unused bedrooms by 2040 if no action is taken, the groups warned, 13 million of them in family homes occupied by pensioners.
Retirees – who typically live alone or in couples – should be lured away with tax breaks, they said.
Professor Les Mayhew, of the Cass Business School, said that the best approach would be waiving stamp duty for “last-time buyers” who are moving into a smaller retirement property.
This would mean that older buyers are offered the same tax break as first-time buyers, who do not pay any stamp duty on property purchases of up to £300,000.
Reader Service: Try our free equity release calculator and see how much tax-free cash you could release from your property
However, the lack of age-appropriate housing such as bungalows means that older people often have few options if they try to move from the family home.
Only 2.5pc of the 29 million dwellings in Britain are defined as retirement housing and the number being built has slumped since 1990.
About 7,000 new retirement homes are built each year but the number of over-65 households increases by 180,000 every 12 months.
Prof Mayhew said councils should be ordered to build more housing suitable for older people as part of a new national framework for construction, with planning permission granted more easily.
Many retirement homes have been criticised for charging excessively high fees to residents, which can put off prospective buyers.
Cultivating this market and allowing people to live in reasonably priced retirement homes would have wider benefits for society, the report said. Suitable accommodation would reduce Government spending on care and relieve the pressure on the NHS.
Prof Mayhew said: “Increasing under-occupation of the housing stock caused by a rapidly ageing population has created a dysfunctional housing market.
"First-time buyers find it difficult to get on the housing ladder and families find moving to larger homes expensive.”