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Archive for the ‘Politics’ Category
Thursday, September 1st, 2011
The National Housing Federation has stated that it expects home ownership in England to fall to mid-80s levels, slumping to just 63.8% over the next decade (Minister vows to get UK building again as home ownership slumps, 31 August). But to address a critical shortage of homes the government has previously made the rather fanciful announcement that it aims to create 170,000 new affordable homes by 2015. In 2010-11 just 105,000 homes were built in England – the lowest level since the 1920s.
I’ve just had to abandon a major scheme that would have provided over 750 new homes, 25% of which would have been affordable, in an area of Essex that sorely needs them. This was because the amount of money the social landlords were initially able to pay for more than 180 homes was drastically cut as they in turn had their funding cut. This made the development untenable as I simply couldn’t afford to build 180-plus homes at a loss.
If the government is serious about increasing housing provision, it needs to recognise that cutting funding to social landlords is not going to help achieve that aim. Social landlords, in turn, need to start concentrating only on helping the poorest households, not mid-high income earners. Currently the rules are so arbitrary that for some affordable housing schemes you can earn as much as £60,000 and qualify for assistance. Others aren’t even means-tested, so you can earn £100,000 but still qualify for a handsome discount as long as you live or work locally.
Only by ending the inequity of a system that fails to address the needs of the poorest households, and freeing the housing sector from the myriad of red tape, taxes and levies that stifle development, will this country be able to get anywhere near delivering the number of new homes, both private and affordable, that it so urgently needs.
Bob Weston
Chairman and chief executive, Weston Homes
•?A well-aimed piece of PR spin from the National Housing Federation has managed to prompt a series of responses in your paper, mostly supporting the aim of the PR, that is to say support for a rapid increase in housebuilding. However, both the reported “facts” and the response need questioning.
1) The decline in home ownership was a projection based on the premise of higher price rises than is likely, given the need for “readjustment” in the housing market to historic links with earnings.
2) The current high rates of private ownership were only possible due to unsustainable reckless lending and borrowing.
3) One big attraction of home ownership is the free money many people have gained through rising prices. When prices are stagnant or falling, the high costs of home ownership may not be so attractive to young people who want to move around.
4) If enough houses were to be built to substantially reduce prices, many will be bought up by rich people and budding mass landlords, and many existing mortgage holders would experience high degrees of negative equity, exacerbated by the rise in interest rates that must happen sometime in the future.
5) As with other goods, it is not so much how many houses we have but how we share them out that is really important. It is the gross inequality in our society, more than anything, that is creating this problem.
Chris Savory
Bridport, Dorset
•?Allegra Stratton (Inside politics: Coalition fears it is unravelling right-to-buy revolution, 1 September) highlights the government’s unease at the burgeoning housing crisis and the low rate of housebuilding. In London, the affordable housing budget has been cut by two-thirds. Boris Johnson isn’t offering any new ideas to help private tenants suffering from record high rents. Nor has Boris offered anything new to reverse the rise in homelessness he had previously predicted. In 2008, Boris promised “a network of Community Land Trusts”, but not a single trust has been set up in London. The mayor needs to lobby for better protection for private tenants, and a realistic housing budget that can provide the low-cost social homes we need. In the meantime, he needs to put all his money and land into keeping rents as low as possible.
Jenny Jones AM
Green candidate for London mayor
•?The mayor of London, Boris Johnson, has long advocated community-led development and the benefits this can bring for building stronger communities.
Contrary to the suggestion in your article, the mayor has already determined that the community should hold the entire freehold of the St Clement’s site in Tower Hamlets in trust. He has also made clear that a community board should oversee management of the homes. This would make St Clement’s the country’s first urban CLT. The site is currently being procured on this basis, and the decision will be subject to the usual procurement rules. But it is clear that whoever is the successful bidder we intend St Clement’s to be held in trust, with the management overseen by the community.
Richard Blakeway
London mayor’s adviser for housing
•?Given the latest evidence that the UK welfare and housing system is failing to break the association between unemployment, poverty and homelessness (Homelessness could spread to middle class, study warns, 31 August), the time is now ripe for a Great Debate – one as “radical” and imaginative as the 1942 Beveridge report – on how to manage social and economic affairs in ways that meet the wellbeing of the many rather than the few. We could do with a quality broadsheet leading such a debate. Any suggestions?
Charlie Cooper
Lecturer in social policy, University of Hull
•?Not only is the current level of home owership even lower than the official figures indicate, but it is also declining at a much faster rate than forecast.
This is because up to three million homes included in the figure for home ownership are in fact leasehold, and leaseholders do not own their homes but merely have the right to live there until the lease expires. In order to stay in their homes leaseholders will have to pay large sums of money to the freeholder for an extension of the lease.
At the same time around half of all newly built homes are now flats, the majority of which are sold on a leasehold basis, reducing still further the proportion of households who will genuinely own their homes.
Nigel Wilkins
Chair, Campaign for the Abolition of Residential Leasehold
•?The key to the housing “problem” is the number of homes, not the proportion of owner-occupiers. There is inevitably a significant proportion of the population who at any given time would be better suited to renting than buying their homes. There is pressure to “get on to the housing ladder” for financial reasons; pressure that if you do not start early enough you will lose out financially. As a result the economy is driven by the housing market to an unfortunate extent. The key issue should be adequate housing to buy or rent. One simple – but probably politically unacceptable – measure would be to try to separate the concepts of a house as a “home” and as an “investment” by removing capital gains tax exemption from the principal private residence. The sky did not fall in when tax relief on mortgage interest was removed.
Paul Russell
Winchester
•?The National Housing Federation talks of the “chronic under-supply of housing” in the context of unprecedented developmental pressure on green spaces. However, markets are composed of supply and demand. England is the most densely populated country in Europe. Given that the UK is experiencing its highest rate of population growth for 50 years, with an estimated 10 million more citizens over the next 15 years, should we not also be talking about – and addressing – our chronic over-supply of people?
Simon Ross
Chief executive, Population Matters
Posted in Boris Johnson, Business, Communities, Construction industry, Homelessness, House News, House prices, Housing, Housing market, Letters, Liberal-Conservative coalition, London, London politics, Money, Politics, Property, Public sector cuts, Public services policy, Real estate, Society, The Guardian, UK news | Comments Closed
Wednesday, August 31st, 2011
Homelessness charity points to direct link between economic downturn and welfare cuts, and rising numbers living on streets
The economic downturn and the government’s deep cuts to welfare will drive up homelessness over the next few years, raising the spectre of middle class people living on the streets, a major study warns.
The report by the homelessness charity Crisis, seen by the Guardian, says there is a direct link between the downturn and rising homelessness as cuts to services and draconian changes to benefits shred the traditional welfare safety net.
In the 120-page study, co-authored by academics at the University of York and Heriot-Watt University, Crisis highlights figures released over the summer that show councils have reported 44,160 people accepted as homeless and placed in social housing, an increase of 10% on the previous year and the first increase in almost a decade.
Last year another 189,000 people were also placed in temporary accommodation – such as small hotels and B&Bs – to prevent them from becoming homeless, an increase of 14% on the previous year.
Crisis says that with no sign of economic recovery in sight, there are already signs that homelessness is returning to British streets. In London, rough sleeping, the most visible form of homelessness, rose by 8% last year. Strikingly, more than half of the capital’s 3,600 rough sleepers are now not British citizens: most are migrants from eastern Europe who cannot find work and, unable to get benefits or return home, are left to fend for themselves on the streets.
The charity says the evidence is that the current recession has seen the poor suffer the most, but other parts of society may be in jeopardy if the government’s radical welfare agenda is acted on as the economy stutters.
“Any significant reduction of the welfare safety net in the UK as a result of coalition reforms may, of course, bring the scenario of middle-class homelessness that much closer,” the report states.
The charity says that the government needs to reverse cuts to housing benefit and invest urgently in new housing. It also calls on ministers to withdraw the most radical provisions in the localism bill, which would make “temporary accommodation” for needy families just that. Under the new legislation, councils would be forced to remove parents and children who have been in a hotel for a year. At present the assistance is open-ended.
There is also an alarming trend in what the charity calls the “hidden homeless” – families forced to squeeze into one room rather than a flat. It says 630,000 households are now “overcrowded”, with London and the south-east the worst hit. This trend could worsen: this summer a survey by the National Landlords Association found more than half of private landlords were planning to reduce the number of properties they let to tenants on housing benefits. Crisis says more families will be forced to share an ever decreasing number of homes.
In a separate report, Channel 4 News will broadcast further evidence that official figures underestimate the true picture of homelessness. In Crawley, West Sussex, the Open House hostel said it turned away people needing a bed almost 2,000 times last year, although official figures estimate there are just seven homeless people in the town. Two-thirds of homelessness organisations nationwide told Channel 4 there had been a rise in rough sleeping in their area.
Leslie Morphy, Crisis’s chief executive, said: “We are extremely worried. Homelessness in both its visible and hidden forms is already rising and as the economic downturn causes further increases in unemployment and pressure on households’ finances, homelessness is likely to continue to rise. This research is clear that it is the welfare and housing systems in the UK that traditionally have broken the link between unemployment and poverty and homelessness, yet these are now being radically dismantled by the coalition government. The government must listen and change course before this flow of homeless people becomes a flood.”
Crisis argues that instead of doubling its efforts to end the “scandal” of homelessness, the government is in effect making it impossible for those on low incomes to pay their rent. It says in the past British welfare policy, unlike that in the US, has linked housing benefit to actual rents. But the government’s changes break this link and mean that claimants will be priced out of swaths of the country – or end up on the streets in wealthy regions.
The report also says the government’s “affordable” house-building regime is likely to generate fewer than 50,000 homes by 2015, “well short of the 80,000 required to meet ministers’ targets”. Gone will be the lifetime tenancies offered by councils which had to give priority to those in need. Instead, under new powers, local authorities will be able to choose families with “local connections”.
With the coalition’s welfare reform bill heading to the Lords and MPs voting on the localism bill next week, Labour said Crisis’s warnings were a “timely reminder of a looming homeless catastrophe”. Karen Buck, Labour’s welfare spokesperson, said the government had played down the rising number of people who thanks to the economic downturn were forced to rely on housing benefit.
She said that since the government took power another 150,000 families had been forced on to housing benefit. “The numbers relying on housing benefit to help with housing costs have been soaring. These figures include not just the unemployed but hundreds of thousands of working families. Rising rents, benefit cuts and housing shortages risk a homeless catastrophe will with all the associated human and financial costs.”
The Department for Communities and Local Government said: “Ministers have always made clear their commitment to ensure the most vulnerable in society are protected, which is why the government is investing £400m in preventing homelessness, and has announced plans to extend the London project, No Second Night Out, across the country so no one spends more than one night sleeping rough.
“But the most important thing the government can do to help struggling households to stay in their homes is to keep interest rates low, and to do that we must cut the deficit. That is why we are introducing reforms that will cut the housing benefit bill. But to ensure a smooth transition to this new system, the government is giving councils a £190m fund to help those families most in need.
“Far from the claims made by Crisis, the government’s £4.5bn affordable homes programme is set to exceed expectations and deliver up to 170,000 affordable homes by 2015.”
Posted in Charities, Communities, Family finances, Homelessness, House News, Housing, News, Politics, Property, Public finance, Public sector cuts, Public services policy, Society, State benefits, The Guardian, UK news, Voluntary sector, Welfare | Comments Closed
Tuesday, August 30th, 2011
• National Housing Federation says home ownership falling
• Group predicts house prices to rise 21% by 2016
• Rents forecast to rise almost 20% by 2016
• Call for more housebuilding to tackle crisis
The housing market is in crisis as home ownership tumbles and house prices soar, a study has warned.
Home ownership in England will slump to just 63.8% over the next decade – the lowest level since the mid-1980s, the National Housing Federation’s forecast, published on Tuesday, said.
Huge deposits, combined with high house prices and strict lending criteria, have sent home ownership into decline, the federation said.
The housing minister, Grant Shapps, admitted that “we have not been building enough homes”, but insisted the government was “in the process of reversing that through massive planning reform” and a “massive programme” involving the release of thousands of acres of public land to build new homes.
The National Housing Federation, which represents England’s housing associations, warned that the housing market will be plunged into an unprecedented crisis as it also forecast steep rises in the private rental sector and a house price boom. It blamed the bleak outlook on an under-supply of homes in the UK.
The chief executive, David Orr, said: “With home ownership in decline, rents rising rapidly and social housing waiting lists at a record high, it’s time to face up to the fact that we have a totally dysfunctional housing market.
“Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy.
“And for the millions locked out of the property market, the options are becoming increasingly limited as demand sends rents rising sharply and social homes waiting lists remain at record levels.”
Shapps said the reason house prices had become so unaffordable was a tripling of prices in the space of 10 years from 1997 to 2007, which put them out of reach for many people.
Asked about the study’s forecast for future levels of home ownership, the minister said forward predictions were “hellishly difficult” to make and were “nearly always wrong”.
He cited a Halifax survey showing that house price affordability has been “improving quite dramatically” and that prices were more affordable than any time over the last 12 years.
However, he admitted there were significant challenges for first-time buyers and said the government had a responsibility to help home ownership.
Asked about the measures being taken, he told BBC Radio 4′s Today programme: “We are releasing enough government land to build Leicester twice over across the country – it is a massive programme.
“The new homes bonus is a multi-billion pound incentive to communities to build programmes, and we are hugely reforming the planning system, which is massively complex.”
He said thousands of pages of planning guidance and law were being boiled down to about 60 pages in a reform “that even the National Housing Federation, who have produced this report this morning, approve of”.
He added that he would be very disappointed if it did not achieve the goal of building more homes.
The federation forecast that, in England, the proportion of people living in owner-occupied homes will fall from a peak of 72.5% in 2001 to 63.8% in 2021.
In London, the majority of people will rent by 2021, with the number of owner-occupiers falling from 51.6% in 2010 to 44% by 2021, it said.
The north-east will be the only English region to see any increase in owner-occupier numbers over the next decade, rising marginally from 66.2% to 67.4%, the federation predicted.
Meanwhile, the average house price in England will rise by 21.3% over the next five years from £214,647 in 2011 to £260,304 in 2016, according to Oxford Economics, which was commissioned to produce the forecasts.
Average rents in the private sector are forecast to increase by 19.8% over the next five years, fuelled by high demand and a shortage of properties.
About 4.5 million people are currently on social housing waiting lists, but only those in the most desperate of circumstances have a realistic chance of being allocated a home.
The federation said that, in 2010-11, 105,000 homes were built in England – the lowest level since the 1920s.
Posted in Business, Communities, Construction industry, First-time buyers, guardian.co.uk, House News, House prices, Housing, Housing market, Money, News, Politics, Property, Real estate, Society, UK news | Comments Closed
Wednesday, July 13th, 2011
Impact assessment admits law may hit vulnerable people, and says councils must find other accommodation
The government’s own impact assessment of plans to criminalise squatting has acknowledged that it could boost homelessness and rough sleeping, and target those who are already suffering from mental health and addiction problems.
The admission follows warnings from campaign groups that the squatting plan will end up “criminalising the homeless” in the middle of a housing crisis.
The justice ministry’s assessment of the proposal, published alongside a consultation paper, acknowledges concerns that it will target individuals who are already leading chaotic lives, and says that the police and local authorities will have to find alternative accommodation for those evicted under the new powers.
But ministers insist that there are other avenues open to help the “genuinely destitute” who need shelter, which do not involve occupying someone else’s property without authority.
Lawyers have also warned that the decision to make squatting a criminal offence and to withdraw legal aid in alleged trespass cases could also be used against Travellers, Gypsies and protesters engaged in direct action.
In the Ministry of Justice consultation paper, published on Thursday, the options include creating a new criminal offence of squatting in buildings, which would enable the courts to jail the most persistent offenders and repeal “squatters’ rights”, which prevent legitimate occupiers of commercial property from using force to re-enter their squatted buildings.
Although the act of squatting or trespass is not a criminal offence, it is illegal to enter somebody’s home as a trespasser and then refuse to leave when asked by the “displaced residential occupier”. But the offence does not extend to squatters who refuse to leave non-residential property, although they may be open to prosecution for criminal damage, burglary or unauthorised abstraction of electricity.
Whitehall officials admit they have no idea of the scale of squatting in England and Wales but say that unofficial estimates put the number at as many as 20,000 squatters at any one time. There is also little research on the proportion who occupy empty, abandoned or derelict buildings. The justice minister, Crispin Blunt, said that ministers wanted to end the “misery, expense and incredible hassle” caused when squatters take over a property.
“Law-abiding property owners or occupiers who work hard for a living can spend thousands of pounds evicting squatters from their properties, repairing damage and clearing up the debris they have left behind,” he said.
Blunt said the government did not accept that squatting was a reasonable recourse for those who were homeless as a result of social deprivation: “No matter how compelling or difficult the squatter’s own circumstances, it is wrong that legitimate occupants should be deprived of the use of their own property,” he said, adding that an “empty homes strategy” would be published over the summer.
But Leslie Morphy of the homeless charity Crisis, referring to Blunt’s wish to end the misery of squatting for property owners, said: “What about the misery facing homeless people who are so desperate for a roof over their heads that they are often forced to sleep in abandoned buildings without heat, light or water?
“Criminalising squatting does nothing to tackle the underlying issues faced by homeless people, and that is their homelessness.”
Paul Reynolds, of the campaign group Squash, spoke of criminalising the homeless during a housing crisis: “Very strong laws already exist to protect the rights of owner-occupiers. This bill will only serve the interests of property speculators who are deliberately keeping properties empty simply to up their profits, and unscrupulous landlords who will abuse these powers to illegally evict tenants.”
Posted in Homelessness, House News, Housing, Law, Money, News, Politics, Property, Society, The Guardian, UK criminal justice, UK news | Comments Closed
Friday, June 24th, 2011
Mortgage lenders including the Halifax and Nationwide are backing a government plan to help potential homeowners. But the pot is limited
More details emerged this week about how the latest government scheme to help first-time buyers will work, with confirmation that major lenders such as the Halifax and Nationwide will be offering mortgages to those who qualify.
FirstBuy will allow people to take out a mortgage for just 75% of the cost of the property, provided they can stump up a 5% deposit, and will help more than 10,000 first-time buyers in England over the next two years, plus a smaller, unconfirmed number across Scotland, Wales and Northern Ireland.
However, it will only apply to newly built properties, which won’t suit everyone, and with a limited pot of money, demand is almost certain to exceed supply – especially in London, which has only been allocated enough cash to help around 940 buyers. The Midlands is getting the biggest slice of the cake, with enough money to help more than 2,400 people.
The scheme – the latest in a long line of initiatives to help people on to the property ladder – was first outlined in the budget in March, and this week ministers said more than 100 housebuilders will take part by offering their properties to first-time buyers, including Barratt Homes, Persimmon, Bovis and Taylor Wimpey. Four lenders have so far been named as backing the initiative: Halifax, Barclays, Nationwide and Melton Mowbray Building Society – though this could rise to as many as 20.
The first homes are expected to be available from September, while details of the specially designed 75% loan-to-value (LTV) mortgages that will be offered to buyers should emerge next month or in early August. In the meantime, wannabe first-time buyers can register their interest in the scheme now by contacting their local “HomeBuy agent“.
FirstBuy will be open to those with a household income of less than £60,000 a year who can put down a 5% deposit – though in London, the income threshold for families buying a home with three or more bedrooms looks set to rise to £74,000 from April 2012, to reflect the capital’s higher property prices.
Those who qualify will be eligible for an “equity loan” worth up to 20% of the value of the property, jointly funded by the government and housebuilders on a 50/50 basis. That means buyers would be able to take out a 75% mortgage for the remainder. The equity loan will be interest-free for the first five years. At the start of year six, an annual fee of 1.75% will be levied on the equity loan, and this fee will then rise by retail prices index (RPI) inflation plus 1% after that.
When you come to sell your home (or after 25 years) you will have to pay back the equity loan in full. The amount you pay back will stay at 20%, so you will have to hand over 20% of the market value at the time of the sale. In other words, buyers are signing away a share of any future “profit”. On the other hand, if prices have fallen when you come to sell, the government and the developer would take a hit, getting back less money than they put in.
“In circumstances where house prices have fallen since the initial purchase, FirstBuy provides an extra cushion for the homeowner against negative equity,” claims the Homes and Communities Agency (HCA), the national housing and regeneration agency for England. The maximum property price that will normally be considered is £280,000, though the HCA says that “on an exceptional basis, depending on location,” a purchase price of up to £300,000 may be allowed. Studio flats and refurbished properties won’t be eligible.
The government had made up to £250m available over the next two years to bring FirstBuy to life, of which up to £210m was earmarked for England, with the remaining cash shared between Scotland, Wales and Northern Ireland. However, the HCA says it is able to bring in a programme to help 10,450 buyers in England by only spending £180m. Some critics say the scheme does little more than scratch the surface of the problems faced by those keen to buy their first home, and that it is more about helping developers to shift their overpriced stock. Others, however, are more positive.
“A scheme that requires only a 5% deposit and offers a 20% equity loan is likely to be extremely popular,” says Melanie Bien at mortgage broker Private Finance. “But it is worth remembering that new-build homes tend not to hold their value as well as older homes in a downturn, and if you are borrowing 95% LTV, this is a risky enterprise. Buyers must consider this as a long-term purchase, not a ‘get rich quick’ opportunity, or they may be sorely disappointed, as well as left out of pocket.”
She adds: “It is not yet clear what mortgage products will be available, but a five-year fix will make much more sense than a shorter deal, as it will protect you from interest-rate rises and fluctuations in property values for a longer period of time.”
Bien says it remains to be seen how many lenders will sign up. “Many are extremely wary of new-build homes as a result of over-inflated values in the past. Even with a maximum LTV of 75%, some simply won’t be interested, deeming it too risky, which will limit choice of product and mean higher rates of interest.”
David Hollingworth at fellow broker London & Country says FirstBuy is running along the same lines as the Labour government’s HomeBuy Direct scheme, although the equity loan available is slightly smaller. “First-time buyers need to understand the implications of equity loans, and should not simply consider them a cheap way to buy. All options should be considered to make sure it is the right option,” he adds.
Posted in Banks and building societies, Business, Economic policy, Features, First-time buyers, House News, Housing market, Money, Mortgage rates, Mortgages, Politics, Property, The Guardian | Comments Closed
Monday, June 13th, 2011
Major study by the Smith Institute warns that a fall in home ownership will add to the burden on the state
The number of people who own homes is set to fall by almost two million by the middle of the next decade, leaving ever more people with limited assets and dependent on the state in later life, a major new study has found.
The grim outlook for aspiring home-owners – and the alarming consequences for government – are spelt out in a report on home ownership to be published this week by the Smith Institute, the left-leaning thinktank.
The study finds that if home ownership stays at 67.4% until 2025, there would be 17.4 million households in owner occupation. But if the trend of falling ownership continues, the level will fall to 60%, leaving just 15.5 million households in owner-occupation.
Paul Hackett, the institute’s director, says that the house price bubble followed by the banking crisis has left the market out of reach of many would-be owners. “There is every reason to believe that home ownership levels will continue to decline and the private rented sector continue to grow. An increasingly large proportion of households will in effect be excluded from the benefits (and risks) of home ownership… wealth will be painstakingly acquired through personal saving.”
The study shows that the number of loans for house purchases more than halved between 2007 and 2010, with people with chequered credit histories or low and insecure incomes being particularly hard hit. The availability of mortgage finance is “most unlikely” to return to the levels of the years before 2007, for a range of reasons – including changes in consumer regulation and more stringent rules for lenders.
The report says the government will have to look at the loss of income from stamp duty and other property-related tax revenues. “It may even be that the coalition will wish to consider some tax concessions along the lines of mortgage interest tax relief [Miras, abolished for principal residences in 2000] to encourage access to home ownership,” the report says.
Posted in Business, Communities, First-time buyers, House News, Housing, Housing market, Money, News, Politics, Property, Society, The Observer, UK news | Comments Closed
Sunday, May 1st, 2011
Levies on land values do not depress or distort wealth creation and are easy to assess, cheap to collect and hard to avoid
Amid all the talk of rebalancing the economy, there is little mention of the most powerful lever the government could pull to generate growth, which involves a switch from taxing income to taxing wealth.
It is a subject that tends to get little coverage, mainly because its supporters are considered on the fringes of the political spectrum. Ultra-lefties support wealth taxes for obvious reasons. Ultra-capitalists support them because they understand that allowing the rich to ring-fence much of the nation’s assets and protect the mechanisms that allow values to increase without any serious government interference robs their children, and everyone else’s, of any incentive to work harder.
And now it is not just the aristocrats who accumulate serious wealth but also increasing numbers of middle income babyboomers – senior teachers, BT engineers, BA airline pilots and local council middle managers. With their million pound homes and million pound pensions, the problem is even bigger.
For an ultra-capitalist, the rapid accumulation of wealth over the last 15 years, which in property terms amounts to about £2.5 trillion, is making us fat and lazy. Only a wealth tax can sort it out.
Yet the debate has broadened in recent years with more mainstream groups taking up the cudgels. The OECD, the rich nation’s thinktank, has joined the ranks of supporters. Liberal Democrats Chris Huhne and Vince Cable, in their pre-coalition careers, also voiced some sympathy. Andy Burnham adopted the scheme in his pitch for the Labour leadership. Many mainstream economists have also argued the case.
Social unrest
The OECD and the orange book Lib Dems, though mostly concerned with making capitalism work better, are also concerned about the potential for social unrest. As the full impact of the financial crisis hits, they can see radical solutions are necessary. They argue for a fairer society because they understand that mature capitalism is becoming sclerotic. Without some fundamental changes those groups with little to lose will turn to protest and violence.
Burnham, who has evidently been doing more thinking than most in the Labour party, can see the potential for an alliance across the political divide that allows him to give the keys of wealth creation and accumulation back to a younger generation too poor to save and with no option but to rent.
What they are all talking about is the adoption of a land value tax. Purists would abolish all current taxes and replace them with an LVT that asked for a payment in line with the value of land under ownership.
Someone earning £40,000 a year would stop paying around £7,000 in income tax, £1,000 to £2,000 in VAT, £1,600 council tax and any of the transaction charges that fill the exchequer’s coffers. No more capital gains tax or stamp duty on property sales or the sale of shares. Instead they would pay a fixed annual sum, to be paid monthly, on the value of their land, which could have a wide range, depending on how much the land is worth.
Move out of town and work locally, and your overall tax bill could be a fraction of its current total. Buy an expensive piece of real estate in the city centre and you would probably pay more.
There are many consequences of following this path that are positive for wealth creation. The worker keeps all his income and there is a 100% gain for every extra hour worked. If you develop your property, it has only limited effect on the value of the land, giving you every incentive to modernise and improve the property.
Under the proper working of the council tax, increases in property values, as opposed to land values, lead to higher taxes, which is a disincentive to carry out those improvements in the first place.
Mark Wadsworth is an economist, blogger, sometime Tory Bow Group adviser and campaigner for land value taxes. He recently told Economic Voice website: “I’m an economist not a politician, and I can only repeat what all the great economists have said down the centuries: taxes on land values are the least bad taxes because they do not depress or distort economic activity, ie wealth creation. Land value tax is easy to assess, cheap to collect and impossible to evade.
“Not only that, LVT is an entirely voluntary tax: you decide how much you are willing to pay and you choose a house or a flat within that price range. Only, instead of handing over all the rent or purchase price to the current owner, the location value would go to the government.”
What he means by this last sentence is that property prices would necessarily settle at a lower level because a buyer will deduct the location value, knowing they must send it to the exchequer in the form of a tax.
Fred Harrison, the doyen of LVT proponents, adds that the effects are broader and longer term. In his 2005 book Boom and Bust, he points out that landowners who aggressively accumulate land for property speculation in prime parts of the country would face a huge tax bill. Idle land would be brought into use, subject to planning permission.
Property wealth
So not only do we get a tax that is easy and cheap to collect, it would be difficult for the super rich to avoid with their offshore trusts and company ownership structures, and it would also lower the value of the asset that is stifling social mobility – property.
As the economist Martin Weale has argued, the accumulation of property wealth is in effect an act of theft perpetrated on the younger generation who must pay the exhorbitant prices demanded by baby boomers or rent.
The OECD argues against taking a purist line. It fully supports tackling taxes on the gains people have made through their businesses activities. These are taxes on entrepreneurialism or plain hard work. (Don’t think of the City fat cat, but the Labour-voting JCB driver who works 20 hours overtime only to find he has crossed into the 40% higher tax bracket. The party of higher income taxes is not helping him.)
However, abolition is a step too far. In a series of documents over the last couple of years the OECD has argued for a shift away from income taxes on individuals and businesses to a land value tax and VAT.
It wants to retain VAT for several reasons. There is the simple advice never to put all your eggs in a single basket. But more importantly, in an age of consumerism and potential environmental degradation, government’s need to influence consumer behaviour and sales taxes are another tool. VAT is embedded in European tax raising and, like LVT, is hard to avoid.
Despite all these advantages, there are many powerful forces ready to dismiss LVT as fanciful, not least the property-owning classes who have an entrenched view that their house price is a just reward for their labour.
But what LVT campaigners have shown is that the average taxpayer will be no worse off – they will simply pay less income tax and a higher wealth tax.
Posted in Business, Chris Huhne, Comment, Economics, House News, House prices, Money, Politics, Property, Public finance, Society, Tax, Tax avoidance, The Guardian, Vince Cable | Comments Closed
Wednesday, April 20th, 2011
MP Stephen Gilbert has complained he can’t afford a house in his constituency of St Austell and Newquay, despite earning £65,738 a year. We do some house hunting for him
Posted in Editorial, First-time buyers, guardian.co.uk, Homes, House News, House prices, Liberal Democrats, Life and style, Money, Politics, Property | Comments Closed
Wednesday, March 30th, 2011
I wonder if Vince Cable can explain how the “mansion tax” he proposes is a “fair” alternative to a tax on those with high incomes (Mansion tax could replace 50p tax rate, says Cable, 28 March). It will effectively represent a levy on pensioners who own, outright, homes with inflated notional values, but who may have small incomes.
The inheritors of such properties would, in any case, be heavily taxed after the owner’s death. How would such a pensioner pay the proposed levy out of a small income? Would they be expected to sell their home in the present depressed market in order to pay the mansion tax? The proposed tax appears to be part of the false idea that the baby boomer generation have somehow “stolen” from today’s young by benefiting from a functioning welfare state. True, many did well out of the property boom, but not nearly as well as the bankers whose bonuses enabled them to purchase buy-to-let properties that further distorted the market.
Professor Elizabeth Wilson
London
•?I am one Liberal Democrat who does not agree with cutting out the 50% tax rate. The idea that 50% is a penal rate is laughable. Vince Cable, like me, is old enough to remember when the UK (under both Tory and Labour governments) did have penal rates of income tax up to 98%, but that’s long gone.
People whose income is over £150,000 can well afford to pay 50% income tax on their marginal income. High-income families benefit from our public services and should not begrudge paying a little more for them and helping those less fortunate than themselves. Those on obscenely high salaries, like bankers and City slickers, should pay higher rates still.
It’s not as if our tax rates are out of line. Austria, Belgium, Denmark, Norway and Sweden all have top income tax rates of 50% or higher, and Germany, Italy and Spain have rates of 45% or more. Even that bastion of capitalism, Switzerland, has a top income tax rate of 45.5%.
I agree with that great economist JK Galbraith that tax is the price of a civilised society. Let’s have the mansion tax by all means, but keep the 50% rate of income tax.
Dr Mick Taylor
Lib Dem candidate, Leeds Central 2010
•?You report Vince Cable as wishing to move away from the “extremely high” marginal tax rate of 50% (actually, 52% when you throw in national insurance). Do the sums for a prospective university teacher under the future arrangements that Cable’s department has constructed. Three years for a BSc, one year for a MSc and three years for a PhD are likely to lead to a total debt that is north of £50,000. Until earnings exceed £40,000, the annual repayments (9% of the excess over £21,000) will not even match the interest charged. Cable says that a marginal rate of 52% on earnings of £150,000 is too high. Why then does he support a system that will charge a marginal rate of 51% (40% income tax, 2% national insurance contributions, 9% student loan) on earnings of £45,000?
John Haigh
Brighton
•?Vince Cable really has gone native if he believes that 50% is an unacceptably high rate of marginal taxation. The rate was 60% even under Thatcher.
Peter Johnston
Bolton, Lancashire
•?You report that the government is considering cutting the 50% tax rate, claiming that many companies and high earners are finding ways of avoiding payment. Surely the solution is to clamp down on such tax evasion, not reward the super-rich for their refusal to pay?
Ministers are quick enough to tackle social security fraud, so why the failure to act when those on telephone-number salaries are fiddling the system?
Dr Pete Dorey
Reader in British politics, Cardiff University
•?Good news re Vince Cable’s announcement on tax. The government “will” abolish the 50p-in-the-pound rate and will “consider” introducing a mansion tax.
Dudley Turner
Westerham, Kent
Posted in Economic policy, George Osborne, House News, Income tax, Letters, Politics, Property, Tax, Tax and spending, The Guardian, UK news, Vince Cable | Comments Closed
Wednesday, March 30th, 2011
Shelter wants government action to regulate private rental sector and for local authorities to run accreditation schemes
Housing benefit cuts and the government’s refusal to regulate the private rented sector will force the most vulnerable citizens to depend on property managed by rogue landlords, Shelter has warned.
The charity has seen a 23% increase in complaints about landlords in the past year, with grievances over “shocking” levels of dampness and disrepair soaring by 40% and complaints about landlord harassment rising by nearly a quarter. At the same time, a chronic shortage of social housing and large numbers of people being priced out of the housing market have led to a 40% rise – to 3.4m – in the number of households in private rental property over the last five years.
Last year the housing minister, Grant Shapps, rejected new regulations and a national register of landlords proposed by Labour on the grounds it would introduce too much “burdensome red tape and bureaucracy”. Instead, he expects councils to tackle rogue landlords.
But Shelter warned that impending cuts to the local housing allowance and growing demand for rental property mean the poorest tenants could be pushed into the arms of the worst landlords.
Campbell Robb, chief executive of Shelter, said: “The housing minister’s claim that ‘the vast majority of England’s 3 million private tenants are happy with the service they receive’ has been seriously thrown into question. Our figures clearly show a worrying increase in the number of people seeking our help regarding problems with their landlord.
It’s frightening to see that complaints about bad landlords are increasing at such a rate at the very time that renting a home is fast becoming the only option for thousands of families across this country. It appears that rogue landlords are cashing in on this growing market.”
Daniel, a 33-year-old teacher of English to foreign students, thought he had found a bargain when he managed to rent a one-bedroom flat in Herne Hill, south London, for £700 a month. But he soon learned why the rent was so low: the flat was one of seven crammed into a terraced house that had previously had four bedrooms. Even the garage at the back had been converted into a flat.
He said: “The agent should have warned me about the number of tenants in the property. The neighbours were fine – there were just too many of them: whole families squashed into one-bedroom flats. The landlord was extremely elusive, and I had to move out for two weeks after a leakage problem caused my ceiling to cave in over Christmas and I couldn’t get hold of him.” But you would ask permission or at least warn tenants if you were going to do that, wouldn’t you?”
Shelter wants Shapps to produce a clear plan to tackle rogue landlords and ensure all local authorities sign up to a minimum standard accreditation scheme.
The Electrical Safety Council (ESC) is also calling for regulation to force landlords to improve electrical safety in rented homes. It says that while landlords are legally obliged to provide an annual gas safety certificate, there is no equivalent legal obligation for electrical installations.
The move is being supported by the family of Thirza Whittall, thea mother of two young children, who died when an electrical fault in her rental home caused the taps on the bath to become live. The electrical wiring in the property hadn’t not been tested since 1981. and tThe ESC says that if an electrical report – known as a Periodic Inspection Report – had been carried out, the faults leading to the tragedycould have been rectified and her death prevented.
Her mother, Jane Andain, said: “Thirza had just moved down from Birmingham to Cornwall, which she loved, and had found work as an orthoptist in the local hospital. Everything seemed to be going perfectly. But the property she’d rented had no earthing in its wiring, and a faulty heater earthed itself through the taps on the bath instead. When Thirza ran a bath and got into it, she was electrocuted.”
The ESC recommends rental homes should have a periodic inspection report carried out by a registered electrician at least every five years, or on change of tenancy. It has produced a leaflet – the Tenant’s Checklist – to provide tenants with essential information to help protect themselves and their families by following a few simple steps.
Shapps said: “The private rented sector performs an important role in providing housing for those who cannot access other forms. … “Accreditation schemes can be an effective way for consumers to identify good landlords in their area, and across the country there are many successful examples. However, the need for a scheme depends on local markets and it is much more appropriate for local authorities to make a decision on setting up a scheme than for government to impose one centrally.”
Posted in Communities, Consumer affairs, Family finances, House News, Housing, Housing benefit, Money, News, Politics, Property, Renting property, Society, The Guardian, UK news | Comments Closed
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Tax property, not people, for a fairer society
Sunday, May 1st, 2011Levies on land values do not depress or distort wealth creation and are easy to assess, cheap to collect and hard to avoid
Amid all the talk of rebalancing the economy, there is little mention of the most powerful lever the government could pull to generate growth, which involves a switch from taxing income to taxing wealth.
It is a subject that tends to get little coverage, mainly because its supporters are considered on the fringes of the political spectrum. Ultra-lefties support wealth taxes for obvious reasons. Ultra-capitalists support them because they understand that allowing the rich to ring-fence much of the nation’s assets and protect the mechanisms that allow values to increase without any serious government interference robs their children, and everyone else’s, of any incentive to work harder.
And now it is not just the aristocrats who accumulate serious wealth but also increasing numbers of middle income babyboomers – senior teachers, BT engineers, BA airline pilots and local council middle managers. With their million pound homes and million pound pensions, the problem is even bigger.
For an ultra-capitalist, the rapid accumulation of wealth over the last 15 years, which in property terms amounts to about £2.5 trillion, is making us fat and lazy. Only a wealth tax can sort it out.
Yet the debate has broadened in recent years with more mainstream groups taking up the cudgels. The OECD, the rich nation’s thinktank, has joined the ranks of supporters. Liberal Democrats Chris Huhne and Vince Cable, in their pre-coalition careers, also voiced some sympathy. Andy Burnham adopted the scheme in his pitch for the Labour leadership. Many mainstream economists have also argued the case.
Social unrest
The OECD and the orange book Lib Dems, though mostly concerned with making capitalism work better, are also concerned about the potential for social unrest. As the full impact of the financial crisis hits, they can see radical solutions are necessary. They argue for a fairer society because they understand that mature capitalism is becoming sclerotic. Without some fundamental changes those groups with little to lose will turn to protest and violence.
Burnham, who has evidently been doing more thinking than most in the Labour party, can see the potential for an alliance across the political divide that allows him to give the keys of wealth creation and accumulation back to a younger generation too poor to save and with no option but to rent.
What they are all talking about is the adoption of a land value tax. Purists would abolish all current taxes and replace them with an LVT that asked for a payment in line with the value of land under ownership.
Someone earning £40,000 a year would stop paying around £7,000 in income tax, £1,000 to £2,000 in VAT, £1,600 council tax and any of the transaction charges that fill the exchequer’s coffers. No more capital gains tax or stamp duty on property sales or the sale of shares. Instead they would pay a fixed annual sum, to be paid monthly, on the value of their land, which could have a wide range, depending on how much the land is worth.
Move out of town and work locally, and your overall tax bill could be a fraction of its current total. Buy an expensive piece of real estate in the city centre and you would probably pay more.
There are many consequences of following this path that are positive for wealth creation. The worker keeps all his income and there is a 100% gain for every extra hour worked. If you develop your property, it has only limited effect on the value of the land, giving you every incentive to modernise and improve the property.
Under the proper working of the council tax, increases in property values, as opposed to land values, lead to higher taxes, which is a disincentive to carry out those improvements in the first place.
Mark Wadsworth is an economist, blogger, sometime Tory Bow Group adviser and campaigner for land value taxes. He recently told Economic Voice website: “I’m an economist not a politician, and I can only repeat what all the great economists have said down the centuries: taxes on land values are the least bad taxes because they do not depress or distort economic activity, ie wealth creation. Land value tax is easy to assess, cheap to collect and impossible to evade.
“Not only that, LVT is an entirely voluntary tax: you decide how much you are willing to pay and you choose a house or a flat within that price range. Only, instead of handing over all the rent or purchase price to the current owner, the location value would go to the government.”
What he means by this last sentence is that property prices would necessarily settle at a lower level because a buyer will deduct the location value, knowing they must send it to the exchequer in the form of a tax.
Fred Harrison, the doyen of LVT proponents, adds that the effects are broader and longer term. In his 2005 book Boom and Bust, he points out that landowners who aggressively accumulate land for property speculation in prime parts of the country would face a huge tax bill. Idle land would be brought into use, subject to planning permission.
Property wealth
So not only do we get a tax that is easy and cheap to collect, it would be difficult for the super rich to avoid with their offshore trusts and company ownership structures, and it would also lower the value of the asset that is stifling social mobility – property.
As the economist Martin Weale has argued, the accumulation of property wealth is in effect an act of theft perpetrated on the younger generation who must pay the exhorbitant prices demanded by baby boomers or rent.
The OECD argues against taking a purist line. It fully supports tackling taxes on the gains people have made through their businesses activities. These are taxes on entrepreneurialism or plain hard work. (Don’t think of the City fat cat, but the Labour-voting JCB driver who works 20 hours overtime only to find he has crossed into the 40% higher tax bracket. The party of higher income taxes is not helping him.)
However, abolition is a step too far. In a series of documents over the last couple of years the OECD has argued for a shift away from income taxes on individuals and businesses to a land value tax and VAT.
It wants to retain VAT for several reasons. There is the simple advice never to put all your eggs in a single basket. But more importantly, in an age of consumerism and potential environmental degradation, government’s need to influence consumer behaviour and sales taxes are another tool. VAT is embedded in European tax raising and, like LVT, is hard to avoid.
Despite all these advantages, there are many powerful forces ready to dismiss LVT as fanciful, not least the property-owning classes who have an entrenched view that their house price is a just reward for their labour.
But what LVT campaigners have shown is that the average taxpayer will be no worse off – they will simply pay less income tax and a higher wealth tax.
Posted in Business, Chris Huhne, Comment, Economics, House News, House prices, Money, Politics, Property, Public finance, Society, Tax, Tax avoidance, The Guardian, Vince Cable | Comments Closed