As mentioned above, you need to set each tag to a non-prefixed version of itself.

_all_ triggers a handler on each tag, tag gives you the tag name and set_tag sets it:

#!/usr/bin/perl

use strict;
use warnings;

use XML::Twig;

XML::Twig->new( start_tag_handlers => { _all_ => sub { my $tag= $_->ta
+g; $tag=~ s{^[^:]*:}{}; $_->set_tag( $tag); } },
                                       keep_spaces => 1, # to keep for
+mating
              )
         ->parse( \*DATA)
         ->print;

__DATA__
<a:houses>
    <a:house>
        <a:sq_footage/>
        <a:address/>
    </a:house>
    <a:house>
        <a:sq_footage/>
        <a:address/>
    </a:house>
</a:houses>
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