William Eichler 04 June 2019

Labour considers abolishing council tax for renters

The Labour Party is considering proposals to replace council tax with a ‘progressive property tax’, which would be payable by property owners rather than tenants.

The proposals, which are part of a raft of policy recommendations in a report on land use in the UK, aim to reduce the tax paid by the majority of households and to discourage the use of homes as financial assets.

The report – entitled Land for the Many – also argues it would lead to a more efficient use of the housing stock.

Over the last two decades the market value of land has quadrupled, which has contributed to increasing house prices.

A recent study of 14 advanced economies, cited in Land for the Many, found that 81% of house price increases between 1950 and 2012 can be explained by rising land prices.

The authors of the report dismiss the idea that the inflation of residential land and housing prices is due to planning delays, immigration or a failure of house building to keep pace with population increases.

They cite the Government’s house price model which suggests that even if the number of homes had grown 300,000 every year since 1996, far outstripping the growth of households, the average house today would be only 7% cheaper.

Land for the Many argues, instead, that land and house prices are shaped by the relative attractiveness of homes as financial assets, compared to other types of investment; the purchasing power with which landlords, speculators and ordinary households can support their desire to buy; and the distribution of that purchasing power.

As well as the ‘progressive property tax’ to address these issues, the report’s authors recommend that the valuation of properties for tax purposes should be updated annually and that empty homes and second homes should also automatically be taxed at a higher rate.

They also suggest a surcharge for all properties owned by those who are not resident in the UK for tax purposes, the abolishing of Stamp Duty Land Tax for those buying homes to live in themselves, the abolishing of inheritance tax, and the introduction of a lifetime gifts tax levied on the recipient.

‘Dig deep enough into many of the problems this country faces, and you will soon hit land,’ wrote George Monbiot, one of the authors of the report.

‘Soaring inequality and exclusion; the massive cost of renting or buying a decent home; repeated financial crises, sparked by housing asset bubbles; the collapse of wildlife and ecosystems; the lack of public amenities – the way land is owned and controlled underlies them all. Yet it scarcely features in political discussions.’

‘This report aims to put land where it belongs: at the heart of political debate and discussion. It proposes radical but practical changes in the way land in the UK is used and governed,’ he added.

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