I completely agree with this article, and also with David's comments below on Government interference breaking a functioning market. Stamp duty in particular now provides a massive distortionary effect on the housing market, and indeed on the jobs market as well. Reducing stamp duty on housing to merely cover the costs of the registration would, I believe work wonders. If we combined that with higher council tax (e.g. a flat rate % on the value of the house) to nudge people into right-sizing their housing (and fill the fiscal gap) that would also be effective and the demand would drive the supply of appropriate homes. (While we're at it, could be also cut stamp duty on UK shares so there is not the disincentive to investing in the UK compared to other jurisdictions)
A flat rate % on houses would be pretty punitive on older people who are not able to downsize because there aren’t enough smaller places available. There is also competition with upwardly mobile first time buyers who can get mortgages for smaller properties.
Giles. That is true but it could be circumvented by providing lending against the value of the property. My calculations indicate that 0.5% flat rate would provide approx £50bn of Council Tax and any cash poor 'crumblies' who wanted to remain in their homes could borrow against the equity of their houses - even 20 years of borrowing would only 'cost' 10-12% of the value of the property. Obviously, I am assuming that the extra demand would be met with supply - but that requires radical overhaul of planning to allow more smaller/independent developers to build houses that are required rather than large developers who build houses that they make the most profit on. But that's another part of the manifesto I expect to see from PN at some point!
I think you’d find this complicated and cumbersome, forcing people into equity release type deals that the banks would exploit and love. Also, as the elderly head towards 20% of the vote, they might point out they’ve been paying back-breaking taxes all their lives and need a break at the end.
If I was in charge (gulp!) I would charge interest at e.g. base rate +1%. Obviously one is not trying to encourage this as a way forward as one would prefer that people either 1) downsize 2) get lodgers in 3) share with younger family members but it would have to be available to avoid cash poor, asset rich pensioners from being effectively evicted from their homes. Another range of positive side effects include a) that we could go on having non-doms and we would get the money from them through council tax e.g. at a higher rate than full time residents, b) we could allow higher rates for non-primary residences to help fund local building in areas of high second home ownership or to dissuade buy-to-let and c) foreign nationals who are buying in the UK as a bolt-hole/offshore piggy bank (think PRC buyers in Battersea or Kings Cross) would actually contribute to local taxes in a significant way especially if the rate for non-residents was higher e.g. 2%
I would say no local income tax as you want to focus the taxation on the ownership of the land in the UK. As per my thoughts above, you do not want to penalise locals at the expense of non-residents. A local income tax would be unhelpful IMO. And finally, since property cannot be moved it should be easy to identify the owner and ensure payment, and if non-payment occurs then literally the tax authorities 'know where you live!'
If you want to focus on land ownership you should focus on the real landowners, descended from the Norman Conquest rather than crumblies (ie people like me who are retired, have a small terraced house in London with a son struggling to get work. Having to get another loan (+admin costs + high interest if base+ 1%) would be v painful. As always these tax ideas hit the struggling middle.
Most towns in the South East have several new developments of retirement housing, usually expensive flats in a central location - which makes sense commercially. The problem is that not every oldie wants to move from a loved and spacious old family home with garden to a town centre appartment. There doesn't seem to be much in between - although there is a demand for this. Stamp duty and moving costs are also a major deterrent - it's shame as we see building more and more houses as the only solution, when we could make a great deal more of our existing stock. If stamp duty were halved, the extra transactions that would follow would more than cover the cost - and add more to the economy in other areas.
I don't know how this would work: but make an incentive for (usually women) to look after their own families. Big incentives to sell up and convert granny annexes. Also look after kids til 12 or so, keep families together. Frees up housing and is better for society and cohesion. Reduces childcare needs/costs.
Demographics is destiny. Most developed economies are facing the same issue of gentrification with consequent economic ramifications (pensioners consume far less) and are tackling it in different ways. Japan is big on developing technological assistance (robotics etc). Canada introduced its MAID euthanasia program (google it) and has been gradually expanding eligibility to "push the button" on more and more potential candidates.
Perhaps we ought to lower the legal age to purchase tobacco products back to 14 again (I'm not kidding)
I'd say access to transport facilities becomes more important in older age, not less so (until you're doddery enough to need a care home). Most old people hate apartments and would only be tempted to downsize by a bungalow. Round my way, younger people are buying small bungalows and adding loft conversions, sadly, so the supply is going down, not up. House values are lowish, and very many older people can't afford to downsize from a house to a bungalow. I think part of the answer lies in complexes of small bungalows close to facilities and maybe with a guest facility that family can rent for visits, as many old people are anxious to be able to put relatives up on the rare occasions that they visit. Obviously service charges would be an issue, though.
I’m surprised there isn’t enough retirement building going on because it’s everywhere around here (in the south east) where we could do with more 2/3 bedroom houses for young families. Speaking as a ‘crumbly’ myself (reluctantly) I wouldn’t want to downsize into one of those awful apartment blocks they think are suitable for people of our age where you can only go out if the lift is working or have to pay extortionate amounts of money in ‘service charges’. I have managed to downsize without going down that route, but could not have afforded the service charges on my pension, which includes a private pension as well as state. So you have to have a reasonable income. Plus some of us are still relatively active and want our own outside space. I believe there are limitations when you come to sell on these properties as well. Not just to whom they are sold. So they are not a one size fits all solution. Variety of smaller properties is what is required. Stamp duty is a real deterrent to people moving and should be completely abolished
One massive potential tax source nobody ever mentions is the global giants like Amazon, Google, FB, Uber, who make a fortune in the UK but pay no tax because of a loophole which allows them to charge ‘management’ fees from a holding company based in Dublin where they enjoy Ireland’s low tax rates. Crumblies could then contribute to the common good every time we order more hearing aids and prosthetic limbs on Amazon.
I completely agree with this article, and also with David's comments below on Government interference breaking a functioning market. Stamp duty in particular now provides a massive distortionary effect on the housing market, and indeed on the jobs market as well. Reducing stamp duty on housing to merely cover the costs of the registration would, I believe work wonders. If we combined that with higher council tax (e.g. a flat rate % on the value of the house) to nudge people into right-sizing their housing (and fill the fiscal gap) that would also be effective and the demand would drive the supply of appropriate homes. (While we're at it, could be also cut stamp duty on UK shares so there is not the disincentive to investing in the UK compared to other jurisdictions)
A flat rate % on houses would be pretty punitive on older people who are not able to downsize because there aren’t enough smaller places available. There is also competition with upwardly mobile first time buyers who can get mortgages for smaller properties.
Giles. That is true but it could be circumvented by providing lending against the value of the property. My calculations indicate that 0.5% flat rate would provide approx £50bn of Council Tax and any cash poor 'crumblies' who wanted to remain in their homes could borrow against the equity of their houses - even 20 years of borrowing would only 'cost' 10-12% of the value of the property. Obviously, I am assuming that the extra demand would be met with supply - but that requires radical overhaul of planning to allow more smaller/independent developers to build houses that are required rather than large developers who build houses that they make the most profit on. But that's another part of the manifesto I expect to see from PN at some point!
Thanks Alex, Would the loan be interest free?
I think you’d find this complicated and cumbersome, forcing people into equity release type deals that the banks would exploit and love. Also, as the elderly head towards 20% of the vote, they might point out they’ve been paying back-breaking taxes all their lives and need a break at the end.
If I was in charge (gulp!) I would charge interest at e.g. base rate +1%. Obviously one is not trying to encourage this as a way forward as one would prefer that people either 1) downsize 2) get lodgers in 3) share with younger family members but it would have to be available to avoid cash poor, asset rich pensioners from being effectively evicted from their homes. Another range of positive side effects include a) that we could go on having non-doms and we would get the money from them through council tax e.g. at a higher rate than full time residents, b) we could allow higher rates for non-primary residences to help fund local building in areas of high second home ownership or to dissuade buy-to-let and c) foreign nationals who are buying in the UK as a bolt-hole/offshore piggy bank (think PRC buyers in Battersea or Kings Cross) would actually contribute to local taxes in a significant way especially if the rate for non-residents was higher e.g. 2%
What is the policy here on council tax? Should there be a local income tax instead?
I would say no local income tax as you want to focus the taxation on the ownership of the land in the UK. As per my thoughts above, you do not want to penalise locals at the expense of non-residents. A local income tax would be unhelpful IMO. And finally, since property cannot be moved it should be easy to identify the owner and ensure payment, and if non-payment occurs then literally the tax authorities 'know where you live!'
If you want to focus on land ownership you should focus on the real landowners, descended from the Norman Conquest rather than crumblies (ie people like me who are retired, have a small terraced house in London with a son struggling to get work. Having to get another loan (+admin costs + high interest if base+ 1%) would be v painful. As always these tax ideas hit the struggling middle.
Most towns in the South East have several new developments of retirement housing, usually expensive flats in a central location - which makes sense commercially. The problem is that not every oldie wants to move from a loved and spacious old family home with garden to a town centre appartment. There doesn't seem to be much in between - although there is a demand for this. Stamp duty and moving costs are also a major deterrent - it's shame as we see building more and more houses as the only solution, when we could make a great deal more of our existing stock. If stamp duty were halved, the extra transactions that would follow would more than cover the cost - and add more to the economy in other areas.
I don't know how this would work: but make an incentive for (usually women) to look after their own families. Big incentives to sell up and convert granny annexes. Also look after kids til 12 or so, keep families together. Frees up housing and is better for society and cohesion. Reduces childcare needs/costs.
Demographics is destiny. Most developed economies are facing the same issue of gentrification with consequent economic ramifications (pensioners consume far less) and are tackling it in different ways. Japan is big on developing technological assistance (robotics etc). Canada introduced its MAID euthanasia program (google it) and has been gradually expanding eligibility to "push the button" on more and more potential candidates.
Perhaps we ought to lower the legal age to purchase tobacco products back to 14 again (I'm not kidding)
Or free cigarettes and crack for pensioners
https://www.aljazeera.com/opinions/2024/2/16/canadas-assisted-dying-regime-should-not-be-expanded-to-include-children
I'd say access to transport facilities becomes more important in older age, not less so (until you're doddery enough to need a care home). Most old people hate apartments and would only be tempted to downsize by a bungalow. Round my way, younger people are buying small bungalows and adding loft conversions, sadly, so the supply is going down, not up. House values are lowish, and very many older people can't afford to downsize from a house to a bungalow. I think part of the answer lies in complexes of small bungalows close to facilities and maybe with a guest facility that family can rent for visits, as many old people are anxious to be able to put relatives up on the rare occasions that they visit. Obviously service charges would be an issue, though.
I’m surprised there isn’t enough retirement building going on because it’s everywhere around here (in the south east) where we could do with more 2/3 bedroom houses for young families. Speaking as a ‘crumbly’ myself (reluctantly) I wouldn’t want to downsize into one of those awful apartment blocks they think are suitable for people of our age where you can only go out if the lift is working or have to pay extortionate amounts of money in ‘service charges’. I have managed to downsize without going down that route, but could not have afforded the service charges on my pension, which includes a private pension as well as state. So you have to have a reasonable income. Plus some of us are still relatively active and want our own outside space. I believe there are limitations when you come to sell on these properties as well. Not just to whom they are sold. So they are not a one size fits all solution. Variety of smaller properties is what is required. Stamp duty is a real deterrent to people moving and should be completely abolished
One massive potential tax source nobody ever mentions is the global giants like Amazon, Google, FB, Uber, who make a fortune in the UK but pay no tax because of a loophole which allows them to charge ‘management’ fees from a holding company based in Dublin where they enjoy Ireland’s low tax rates. Crumblies could then contribute to the common good every time we order more hearing aids and prosthetic limbs on Amazon.
Suggests to me a hike in VAT is possibly on the cards