Diagonal Comparison of The Month

Our Homey-in-Chief Emeritus spewed this nonsense a month ago:

Five shocks that could hit businesses over the next few years

2) A PROPERTY CRISIS

Far too few homes are being built in the UK at a time when the population is growing. As Savills points out, the number of households is expected to rise by 221,000 per year – housebuilding in England is at half the level required. The greatest housing demand comes from households on less than £50,000 a year. The lack of supply – caused by daft regulations – will push up prices, reduce the home ownership rate and fuel social tensions...

This is just bog standard Faux Lib nonsense, completely ignores observable facts and reality, but Ben Jamin' has already covered this one in adequate detail: "So are you saying, without planning regulations, the cost of a flat overlooking Hyde Park in London or on Sandbanks would cost me no more that its rebuild cost?"

There's a logic fail for good measure: "The lack of supply… [will] reduce the home ownership rate". Who says? All homes are owned by somebody (the occupier, the bank, the landlord, the local council etc) and everybody lives in a home. What forces are there, pray tell, which mean that "lack of supply" automatically means that more of the existing pool of homes will be owned by landlords rather than by their occupiers? (Clue: the tax system as it stands is heavily rigged to lead to this outcome, with or without "lack of supply").

...The backlash may well lead to a mansion tax,(1) which could make London much less competitive,(2) chase away overseas investment(3) and shatter the UK’s reputation as a safe haven...(4)

1) The argument for taxing the rental value of land (of which the Mansion Tax is a pale distant cousin) is not a backlash against anything, it is the natural order of things. It is the Homeys, Faux Libs and Socialists who are leading the backlash against LVT.

2) No, what makes the London area "competitive" is lots of other things - large amounts of highly motivated or highly skilled people, excellent public transport, lots of airports, it's the centre of government, it has a disproportionate number of things and events which make it attractive to foreigners etc. Rental values and house prices are merely the result of all that and not the cause. People are prepared to pay a premium to live in or near London. Whether those rents are collected or consumed privately (by landlords, banks and owner-occupiers) or by the government makes no difference.

3) It will not chase away overseas investment, it's taxes on incomes, profits etc which do that. Foreign kleptocrats selling each other over-priced London land and buildings for stratospheric prices is no in any way shape or form "overseas investment".

4) There are plenty of countries viewed as "safe havens" (the USA, Switzerland, Hong Kong) who have much higher property taxes than we do. The annual tax on the flashiest apartments in Manhattan is over $100,000, and the Swiss have a very clever system for taxing wealthy foreigners, basically they do not have to declare or pay tax on their actual income, they can choose to pay a flat tax of about 5% - 7% of the selling price of their Swiss home.

… Because of the inconsistencies of the mansion taxes as proposed to date (5) – someone with ten properties worth £1m would pay nothing, somebody with one worth £2m would be hammered (6) – the levy would eventually mutate into a more general, French-style wealth tax,(7) chasing away the middle class (8) and wealthy high-skilled migrants(9) that have helped fuel London’s economic recovery over the past few years.

This is the sick-making nub of it and what the HICE sees as his Killer Argument.

5) Yes, the Mansion Tax is LVT watered down to a stupid degree, adding a couple of dozen more Council Tax bands at the top and a few more at the bottom, or going back to Domestic Rates for all homes would be much more sensible.

6) That is the ultimate diagonal comparison and is factually incorrect anyway (or "an outright lie", depending on your point of view). The Lib Dems' proposed Mansion Tax (and the real life actual ATED) only kicks in at £2 million, so somebody in a home worth £2 million pays not a penny. I don't call that "being hammered".

7) No it wouldn't. A tax on the consumption of rental values has nothing to do with taxes on private wealth, if anything it is the opposite. For the obvious solution, see (5).

8) F- knows how he equates "middle class" with "people who are old enough to own expensive homes" and why he thinks that only "wealthy" migrants can create wealth. You create wealth by going out to work or running a profitable business, which is what most migrants to London (whether from elsewhere in the UK or abroad) do, and most of these are now tenants.

You don't create wealth by laundering money you stole abroad by spending millions on a central London home and leaving it empty most of the year. And Poor Widows In Mansions are clearly not creating wealth, even if they did in the past, they have clearly squandered it all, or else they wouldn't now be poor, natch.

9) I am prepared to accept that higher property taxes might chase away the last few Poor Widows In Mansions (assuming they genuinely want to leave something to their children instead of rolling up the tax), but means that more actual wealth creators will be able to move to London (a few homes having been freed up). These new arrivals will be entirely unaffected by the tax as it comes off the purchase price or the rent.