Saturday, 28 December 2013

Killer Arguments Against LVT, Not (312)

This just came up in conversation, so back to that developer-sponsored Policy Exchange report (page 57) to give an example of this KLN:

7.2 Planning and banking changes are the real solution to issues of inequality and volatility that land and property tax try to deal with

If politicians want to fix the real underlying problems with the UK housing market, they need to get to grips with the real issues. As was discussed in chapter 3, rising land and house prices are related to a fundamentally broken planning system that pushes up the value of land with planning permission ever higher. This is clear from the evidence of the past 30 years. If we do not build enough homes, house prices and rents will rise.

[On the facts this is all outright lies:

There is plenty of evidence to show that LVT dampens price volatility. For example, the price bubble for commercial land and buildings subject to quasi-LVT i.e. Business Rates was much, much smaller than for residential, for example.

Conversely, there is no evidence that the supposed lack of supply pushes up rents. Rents have changed in line with Ricardo's Law, i.e. they reflect local average wages, so rents have gone up quite a bit in London/South East and remained pretty flat Up North.

Changes in prices are purely down to credit availability and get-rich-quick mentality. It is actually almost impossible to prove the commonplace that it is only interest rates which matter - what matters is that people think that prices will rise faster than whatever the prevailing interest rate is.]


... the main point of LVT is to have a fair and equitable tax system which does not impede economic growth, any impact it has on new construction is a side-issue as that will always be overridden by planning laws (LVT works conceptually just as well with or without them, so for the sake of this discussion let's assume they remain unchanged).

LVT would be a good idea whether land ownership was widely and evenly spread or concentrated in a few hands; whether house prices happened to be at the top of a boom or the bottom of a bust. And any perceived 'inequality' will sort itself out if working people under 40 have their income tax bills halved and the Baby Boomers are asked to make up the shortfall in LVT, even if not a single house changes hands or a single new house is built.

As to their main non-argument - LVT and new construction - far more important is the fact that it will encourage much more efficient use of existing land and buildings. We have 25 million 'spare bedrooms' in this country, and heck knows how much vacant shop, office and warehouse/factory space. Economically it is always better putting stuff you already have to its best use instead of leaving it chronically underused and desperately building new stuff in less favourable locations. Whether we allow 100,000 or 300,000 new homes to be built a year is a drop in the ocean compared to all the under-utilised existing space.


Dinero said...

It has this statement

"There is no reason why land should cost much more for residential development than for agricultural purposes."

Which is incorrect as there is a reason, that reason being that land for agricultural purposes is generally not located at the same location as land for residential purposes.

Mark Wadsworth said...

Din, good example, the whole thing is full of lies like that.