Friday, 18 July 2014

Killer Arguments Against LVT, Not (329)

BenJamin spotted two for the price of one over at the TPA:

Britain already has the highest property taxes in the OECD (see chart), mostly in the form of council tax. Some claim a higher purpose to property taxes than merely soaking the supposed rich – that of putting a lid on property prices.

If that’s the hope, then it is equally misplaced, for such taxes plainly haven’t done much good so far.

That's a good old-fashioned lie.

UK commercial premises have just about the highest annual property taxes in the world (Business Rates) but Council Tax on housing is low by international standards.

If you deduct the £700 per home Poll Tax element, the amount of Council Tax which relates to the value of the home is negligible (about 0.3% of its value up to the first £1 million or so, nothing above that).

Which is why commercial land is cheaper than residential land, and why developers can make windfall gains by getting commercial rezoned as residential - they can get rid of three-quarters of the annual tax at a stroke. And which is why the bubble in commercial prices was much smaller and shorter lived than for residential.

As for so-called “granny” clauses, allowing the elderly to roll up their liability until death, this hardly solves the problem. The eventual fire sale of baby boomer homes would only further undermine house prices down the line.

He appears to assume that lower house prices is A Bad Thing, which is not true. And as Ben points out in the comments, the author of the piece himself says that the best way to get prices down is to build more; assuming this to be true (it isn't really), this would imply that he thinks lower prices are A Good Thing.

Either way, when houses are inherited, they are usually sold. So the number of such houses being sold depends on how many widows or widowers die each year, which is a fairly fixed figure, about three hundred thousand a year.

In the absence of a crystallised LVT bill, presumably slightly more of those houses would be kept and rented out by the heirs; but they would be rented to the people who would otherwise have bought them.


Lola said...

I thought that the number of death p.a. was higher than 300,000. More like 600,000. Not that it makes any difference to the thrust of your post. Just sayin' is all.

Mark Wadsworth said...

L, yes, but the death of the first spouse (of whatever age) or the death of a non-retiree can be excluded as not relevant to the "roll up and defer" scenario.

mombers said...

Reading that article has made me so angry!!!

mombers said...

Disqus is blocked at my office - going to have a field day on it tonight. Nice comments MW and Ben

Bayard said...

"Could a Mansion Tax make our housing markets even more dysfunctional?"

No. Next question?