Killer Arguments Against LVT, Not (324)

A rich harvest of rather half-baked KLNs in City AM Forum:

[The Mansion Tax] would also be fundamentally unfair. Why should people who purchased properties that have appreciated in value be subject to an arbitrary annual penalty?

Perhaps those in all three parties who still support a classic mansion tax are also in favour of a windfall tax on owners of Apple shares, which have increased in value by 4,000 per cent in the past ten years?

And new plans for higher bands of council tax would retain many of the ugliest features of a mansion tax. Their introduction would almost certainly require a costly, full revaluation of all residential property in England.

Without substantial reform at the same time, this would push even modest properties in less desirable areas of London into higher bands and higher bills. Many of those hit by bigger tax bills would be renters.

OK, we can answer most of these questions by looking at something less contentious like beach huts.

Let's imagine the local council granted leases decades ago for £50 a year and never got round to increasing this, so hardly anybody has ever surrendered a lease, you either keep it for yourself, even if you only use it once or twice a year it's still good value, and if you don't need it, it is very profitable to sub-let.

The council maintains a waiting list with five times as many people on it as there are huts, and happens to pick up on the fact that they are being sub-let for up to £5,000 a year.

So the council finally mans up and increases the annual rent to £4,000. That doesn't require a "costly revaluation" of every plot of land in the whole town. It does not tax people on capital gains, the benefit (the rent saved/sub-letting income) is in the past and cannot be touched.

It makes no difference how long you have been a tenant, the £4,000 is demanded from those who have had a beach hut since the year dot and those who finally got to the top of the waiting list last year.

Those people on the waiting list don't mind about the charge, it is entirely their choice whether to pay £4,000 or not (which is better than having to languish on the waiting list for ever), and sub-tenants who are currently paying up to £5,000 aren't bothered either - a sub-tenant who was paying £5,000 cash in hand is not going to start paying £9,000 so that the actual tenant continues to keep the profit, because the hut is not worth more than £5,000.

The new improved beach hut charge is clearly not a "wealth tax". The local council doesn't care if the new tenants own Apple shares or not; the council is delighted that there are some people prepared to pay the new rent. If the council then levies a surcharge on tenants who own Apple shares then those tenants will disappear again (or simply not declare their Apple shares, hence and why "wealth taxes" are pointless at best.

This also illustrates the stupidity of the "disappearing homes conundrum" so beloved of the Homeys; while the Poor Widows In Beach Huts disappear off the scene, the beach huts are still there, and the chances are that anybody keen enough to pay £4,000 to rent one will visit it more regularly; keep in it good condition and have enough money to spend a bit in the local shops as well.

Sandbanks Beach Huts

From the BBC

A council has made more than £5,500 from a beach hut waiting list within a few hours of it opening.

Borough of Poole said 223 people paid £25 to join the waiting list for huts on Dorset's exclusive Sandbanks beach, which reopened on Tuesday. The council said the non-refundable fee was to make sure that people joining the list genuinely wanted a beach hut…

The waiting list, which has been closed for seven years, reopened online at 12:00 GMT but crashed moments later. By 09:30 GMT on Wednesday, there had been 8,540 views of the booking web page and 355 phone calls to the inquiry line.

A council spokeswoman confirmed that the booking system had "keeled over" and added: "Everybody wanted to register straight away so they can be top of the list."

There are about 150 beach huts in Sandbanks and, before registration reopened, there were already about 80 people remaining on the waiting list…

There are more than 1,000 huts along Poole's coastline, most of which are leased annually, and around 80 more are due to be built. Borough of Poole council said it had reopened the list because it had "reduced significantly" to 193 applicants across all its seven locations.

Waiting lists for huts in Shore Road, Flaghead, Canford Cliffs, Branksome Chine, Branksome Dene and Hamworthy are due to open in the next six weeks.

Great. Poole Council has made £5K from some booking fees. That'll cover the cost of hundreds of meals on wheels.

But you know,when you've got 8540 people trying to hit your page within minutes of it opening to rent a beachhut on Sandbanks where the cost of houses hit the millions, it might give you a clue that maybe you've underpriced the rent.

I'm pretty sure that if the same thing happened with a Keycamp holiday camp (rather than taking months to sell out), that they would consider pushing the prices up the following year.

Seriously, does anyone actually need to do this any longer? Stick the beach hut rentals on eBay and let people bid on them. You'll quickly discover the market price that people want to pay and they've got the sort of infrastructure that can handle it.

It's what we did with the 3G and 4G auctions. You've got something in limited supply that was created by god/gaia/billions of years of evolution of the universe and is maintained and defended with the help of state spending, so you extract as much money out of people who'd like it and spend it on the people.

A plan to reduce the waiting lists by limiting leases to five and 10 years was dropped in 2012 after objections from existing tenants.

Which is another sign that the rental value is too low. If they were priced correctly, people might grumble a little but they'd hardly be that bothered. They'd go and find somewhere else to go instead. These people are rent-seekers, sponging off the state to enjoy things at below the market price.

One of the Troubleshooter programmes had Sir John Harvey Jones visiting Morgan where he asked why they didn't raise the price of their cars, as all it did was to give money to scalpers who took places in the queue, bought the cars and immediately sold them for a profit. And I'd bet all the land values of Sandbanks that some of those people with long leases aren't staying in the huts but making money on the side sub-letting them.

When you start thinking about 1,000 huts, a gain of £5500 is pissing in the sea compared to what they could be making.