Larger properties should be taxed more to encourage owners to downsize, Tony Blair’s think tank has said.

Researchers at the Tony Blair Institute are calling for the council tax system to be reviewed and ultimately replaced with a levy set at 0.5% of the home’s current value.

Thomas Smith, the institute’s director of economic policy, said the move would “incentivise homeowners in larger, under-occupied properties to downsize, improving housing market fluidity and supporting economic mobility”.

Almost 10 million homes in England had at least two unused bedrooms last year, according to the English Housing Survey.

The Tony Blair Institute, founded in 2016 by the former Labour prime minister, is also calling for buyers to be able to spread out stamp duty payments over 20 years.

Tom Smith, the institute’s director of economic policy, commented: “From today home buyers in England and Northern Ireland will pay more stamp duty when temporary reliefs come to an end.

“While these changes are necessary given the state of the public finances, they mean many people will be paying thousands of pounds more to buy a home, and for some people – such as first-time buyers – this change may mean they aren’t able to purchase a home at all.

“Stamp duty is long overdue reform. As we have previously set out, households should be allowed to spread stamp duty payments over 20 years through a government backed loan.

“Crucially, any household that moved within 20 years would not need to pay off the remainder of their loan. This would remove the upfront tax penalty on mobility, encourage labour-market flexibility and support growth by making it easier for people to move for work.

“Council tax for households across the UK will also increase from today with figures showing that households in the North East of England face paying £444 more in council tax on average than those in central London.

“Replacing the existing council-tax system with a capped proportional levy set at 0.5 per cent of up-to-date property values would help address this imbalance. It would also incentivise homeowners in larger, underoccupied properties to downsize, improving housing-market fluidity and supporting economic mobility.

“These are the sort of radical changes government should be making to kick-start economic growth.”