Property owners should be taxed on the value of their sites rather than the actual buildings, a think tank has said

Compass, a centre-left pressure group, has said a land value tax should replace council tax and business rates in order to reduce the tax burden on lower and middle income people.

The tax would be levied annually on the estimated value of undeveloped sites or the land on which properties stand. Homes would not be taxed.

The report said such a tax would stabilise the housing market and end boom-and-bust cycles by preventing the speculative purchasing of land.

The study also recommended that the public sector pay for increased investment in social housing and infrastructure by retaining a stake in new sites. It added that chains of housebuyers and sellers could be ended if owners sold their homes to a public clearing house for a small fee.

Toby Lloyd of Navigant Consulting, the report’s author, said: “Now is the moment to introduce radical reform.”

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