Socialist think-tank the Social Market Foundation is calling on the government to abolish council ta...
Socialist think-tank the Social Market Foundation is calling on the government to abolish council tax and stamp duty to solve the existing housing crisis and instead impose a 40% Capital Gains Tax on the sale of a home.
Opening up the supply of rented and owned accommodation to Registered Social Landlords and changing the taxation system would significantly help the shortage of affordable housing currently available in areas of the UK, such as the South-east, argues Tom Startup, researcher at the SMF.
It would also smooth out some of the volatility of the economy which is so heavily influenced by fluctuating house prices, because it would place the treatment of private landlords and RSLs "on the same fiscal and regulatory system".
"Mass home-ownership also generates significant problems for the economy more generally due to the relationship between house prices, consumer demand and the cost of business investment," says the SMF report.
"In times of economic difficulties lower interest rates may be a useful tool for expanding business investment. However, they also tend to boost demand for housing and lead to excessive consumer debt. A desire to 'cool' the housing market through raising or maintaining interest rates may conflict with a desire to stimulate business investment."
Rather than subsidising council rental properties and home-ownership schemes, the SMF argues that getting rid of council tax - because it argues there is never any clear reason why one property might be more expensive than the one next door which is identical - and stamp duty on housing transactions would even out the balance between those who 'gain an advantage and live in their own home' to those people who choose to buy property as a rental business, or are simply priced out of the market without significant financial help.
Asking homeowners to pay 40% CGT whenever they sell their property, as well as the payment of a 1.5% property tax to homeowners - based on either the imputed rental income or the market value of the property - would even out the "tenure bias", argues Startup.
"The whole housing market is driven by a strong bias towards home-ownership. Low levels of new building are caused by volatile prices and a restrictive planning system. These low levels then cause house price inflation, fuelling demand for home-ownership and exacerbating affordability problems for low-income households," says Startup.
"The only truly effective means for tackling this problem is to increase the taxation of homeowners, bringing it into line with the treatment of private landlords. Capital Gains Tax on home ownership and an annual property tax proportional to the market value of the property would be necessary to reduce volatility and restore building levels. If necessary, stamp duty should be offset by decreasing or abolishing council tax or stamp duty," he adds.
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