Wednesday, Nov 08, 2006

MPs call for land tax to encourage home building

Financial Director: MPs call for land tax to encourage home building

A tax on increases in land value could stimulate the building of thousands of new homes by raising money for new infrastructure. A parliamentary committee is to say today that a tax on increases in land value could finance the building of thousands of new homes.

Posted by monty @ 10:43 AM (387 views)
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1. monty said...

I was under the impression that the land tax was going to include some sort of encouragement/inducement to get those developers and others sitting on massive land banks to free them up for development. This just sounds like the Treasury trying to cash in on the building spree. Where's the incentive? As soon as house prices drop or stagnate, developers pull plans and the building spree slows to a trickle (as has already happened in the US.) The land always keeps until the next boom.

Just loving the newspeak though. It's not a land tax - it's a planning gain supplement! There's a link in the article to the consulation document.

Wednesday, November 8, 2006 10:57AM Report Comment

2. tyrellcorporation said...

That's just like 'Speed bumps' being re-branded as 'safety cushions' and speed cameras as 'safety cameras'. All part of rampant dumbing down and a washed out government perpetually stuck on the spin cycle...

City academies!!! remember, image IS everything!

The article and the idea of a land tax seems to me unworkable and yet another 'pissing-in-the-wind' attempt to rein in this frothy market. Grab the bull by the horns and tackle second home ownership and BTL head on - Its the only way IMHO.

Wednesday, November 8, 2006 11:25AM Report Comment

3. millard said...

tyrellcorporation - spot on.

There is another set of horns they should be tackling: lending criteria, particularly self cert mortgages where people are encouraged to inflate there earnings. Granted its a bit stable door, but it does need addressing.

Wednesday, November 8, 2006 12:01PM Report Comment

4. paul said...

I think self interest is the overriding issue. All those MPs with second properties don't want to crap on their feathered beds.

The housing issue is becoming the elephant in the living room, and the bigger it gets the more they're trying to avoid it.

Wednesday, November 8, 2006 12:52PM Report Comment

5. sold 2 rent 1 said...

Ive just had a brain-wave

Fred Harrison argued in his book The Power of the Land (1983) that land taxes are the way out of boom and bust economics.

Read the book review

Here is a quote, Today's recession (1983) is nothing more than a continuation of the slump of 1974 which was caused by the global speculation in land during the previous three to five years.

We are in the same position as the early 1970s; on the verge of entering into a secular housing bear for the next 18 years

Once house prices start to fall we will be into a secular bear (for 18 years) for house price affordability. We can expect 3 house price crashes (in real terms) every 9 years (approx 2008, 2017, 2026) with each low point leaving prices less affordable than the last.

See the affordability graph and this is exactly what it shows

I have been looking at how secular trends work for stock markets and they are remarkably similar the housing market. The stock market secular bull (1982-2000) and bear (1966-1982) show the same affordability trends; from incredibly low PE ratios in 1982 to incredible high ones in 1966 and 2000.

The housing crash that is closing in on us will not be like 1990; where after 5 years of decline we will have 14 years of house price growth. It will be like 1974 where prices recover and crash 5-6 years later.

Wednesday, November 8, 2006 01:25PM Report Comment

6. Rothers01 said...

I've never understood why the Chancellor has never extended VAT to include new homes. Contrary to popular opinion it wouldn't increase the cost of new houses, as these are determined by the market price for a home which in turn are largely determined by the price of the existing stock.

What it would do is reduce the net amount a developer gets when he sells the house, which given building costs remaining constant, would reduce the amount he can afford to pay for the land and therefore you create an indirect land tax.

This would achieve the same goal without the need for the creation of a new tax with the requisite whole new army of new civil servants. There would be no increase in work for the VATman as he already has to police the current new home VAT exclusion.

Then the Chancellor can use ALL the extra VAT he is getting to help build some of the 000,000s of new homes needed.

Wednesday, November 8, 2006 01:54PM Report Comment

7. talking rot said...

Winston Churchill, when at the Treasury, tried to introduce a Land Tax; specifically to make the rich pay more tax then those who are less well off. I don't recall if that was his reasoning but he wanted to create economic statbility or, in modern parlance, no boom or bust economics.

What a sharp guy. Shame the idea was voted down - it was a contributing factor to Mr Churchill losing his job at the Treasury. Now, perhaps, the idea is back in vogue. It could certainly bring in a lot of tax revenue and is rather voter friendly - unless you own large plots of land.

Wednesday, November 8, 2006 01:54PM Report Comment

8. Boarder said...

Has reasons for why a land tax should replace other immoral forms of taxation.

Wednesday, November 8, 2006 02:15PM Report Comment

9. paul said...

Problem is, TR which group of people in the UK own vast tracts of land and houses?

MPs and Lords of course. No prizes for guessing why the legislation didn't get very far, and probably won't this time either.

Pure self interest. They'd vote to double their own pay and half their working hours if they thought they could get away with it.

Wednesday, November 8, 2006 03:44PM Report Comment

10. sold 2 rent 1 said...


You misunderstand why it has to be a land tax and not a property tax.

VAT on new houses will not:

- stop developers buying land and waiting years before developing
- stop 100,000s of houses sitting empty
- get urban waste land redeveloped

A land tax makes every owner examine all his land for productiveness
It costs the owners a percentage every year. It is not a one off purchase tax.

Wednesday, November 8, 2006 04:20PM Report Comment

11. autopilotengage said...

I agree with the concept of a land tax; in economic terms, the market must be used to show landowners the social opportunity cost of them allowing land to go unused.

Wednesday, November 8, 2006 08:17PM Report Comment

12. indiablue19 said...

Just a dumb question perhaps, but isn't it time in a crisis shortage of decent homes on decent pieces of property that William the Conqueror's largesse to the artistocracy should be reclaimed? I mean, I understand that one person owns most of Northumbria. A couple of people own most of Scotland. Are you kidding me?

This isn't really good for a load of reasons, decent building space among them. We were in a B&B near Alnwick not long ago and the couple that owned the business were "starting over" at the age of sixty or so. Their original farmhouse had stood on a shallow coal field and the Duke [of Northumbria I guess] put them out of business as farmers of some lovely prime cattle [I saw pictures] by strip mining all their fields over some years. Both of their sons, who had wanted to be farmers as well moved, to the USA and became engineers of some sort. Then the Duke Suchabody put their fields back together a number of years later and told them to go ahead now and get farming. Well, they were long since out of business, the line of cattle they'd begun was extinct, and the Father had no sons to help him anyway. They sold the place, bought a derelict farmhouse and fixed it up as a B&B to make a living. But their hopes, dreams and family are gone.
I don't think that places like Iraq house the only dictators.

Thursday, November 9, 2006 12:05AM Report Comment

13. iguana said...

Rothers01, there is VAT on new houses, but it is levied at 0%. If this were not the case, builders would not be able to reclaim the VAT incurred on the materials costs. I am quite surprised that our dear chancellor has not sought to apply one of the lower 'positive' rates of VAT (5%?) to new houses, but I feel that it is only a matter of time before we follow other EU member states, cats amongst pigeons spring to mind.

Thursday, November 9, 2006 11:52AM Report Comment

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