Two tax agendas. One could help prevent boom and bust in the market, reduce risks for developers, boost investment in rented homes and maybe even solve some of the government’s financial problems. The other could boost profits for estate agents and existing homeowners.
No prizes for guessing which is more likely to happen.
The first is one of eight key proposals in a new report from the Building and Social Housing Foundation (BSHF) for reform of Britain’s dysfunctional housing system. Taxation based on property or land values could help to prevent crashes by discouraging speculative purchase of assets, it says. The reduced volatility would reduce risks for developers and therefore the returns they require and increase scope for investment in long-term rental.
The second calls for the abolition of one of the only existing taxes on house values. The National Association of Estate Agents and Association of Residential Letting Agents want the abolition of stamp duty. They have formed the 1808 Coalition, named after the year it was introduced, to campaign for reform starting with the extension of the stamp duty holiday beyond the end of the year.
Options proposed by the BSHF include:
- Reforming the council tax to make it less regressive or replacing it and stamp duty with one property tax
- Equal tax treatment for owning and renting and for first-time buyers and existing homeowners
- Gradually introducing capital gains tax on first homesInheritance tax incentives for older people to pass on property assets during their lifetime.
Politically impossible? Yes maybe, but the same was said about abolishing mortgage tax relief in the 1990s. It was an unfair subsidy that distorted the housing market and also an absurd one since it was a relief on a tax on imputed rental values that was abolished in the early 1960s.
However, as the report points out, few people noticed when it was finally scrapped because it was phased out over a period when interest rates were falling. Crucially too, it happened in a period when people could remember the crash of the early 1990s and see that it made sense.
The wake of the noughties crash offers an opportunity to go further with reforms that could benefit the housing system as a whole and maybe even help the government out of a financial hole too. If it’s brave enough.
Have your say
You must sign in to make a comment