Sunday, 17 February 2013

A super-tax on second homes is long overdue

Recent posts on this blog have highlighted the obscene costs of housing in London, with some staggering figures provided by Shelter showing that in 5 London boroughs average monthly rent for a 2-bed property is now 75% or more of local median take-home pay.

A feature of the market is the degree to which the very rich are dominating the landscape - with the top 10% of households by property wealth accounting for almost half of all property wealth in London and the bottom 40% having almost no household wealth at all.

At the same time, those forced to rent in private accommodation are seeing record rental costs - jumping almost 5% in a single year.

Figures out this week, finally covered by the Standard (showing that the ridiculous situation is even bothering traditional Tory constituencies) show that an average first time house buyer without 'bank of mum and dad' will need to save for 24 years to accumulate the deposit required to cover a home in London. The average deposit is set to rise to a jaw-dropping £100,000 by the end of the decade. A recent survey from Halifax, meanwhile, classified 100% of London boroughs as being 'unaffordable' for first-time buyers.

Two major factors driving these prices are the distorting effect of rich second (or third, forth) home owners and also buy-to-let landlords hoovering up existing housing stock. These effects are illustrated by figures showing that almost 60% of buyers in central London areas such as Kensington, Chelsea and Marylebone were from overseas and for 37% of these their London property is not their primary residence. Even in the comparatively less affluent borough of Camden, 1 in 16 properties are left empty by their owners.

Meanwhile, last year saw a 15% rise in buy-to-let mortgage approvals. That house building growth has stagnated demonstrates that these landlords are buying existing stock, rather than stimulating new house building, and therefore pushing up prices for those seeking a home rather than an investment opportunity.

News today that the Liberal Democrats are set to consider a 'super-tax' on second homes, in a week that saw Ed Miliband back a mansion tax, is long, long overdue. The alternative will be a generation of people shut out from home ownership, trapped paying exorbitant rents to a minority of very rich landowners. Other countries have used similar policies to prevent the scandal of empty properties owned by the very wealthy resulting the the destruction of local services. It would have a dramatic - and positive - effect in London too.

The question will be whether the powerful vested interests that would stand to lose from such a policy, coupled with the resistance to 'taxes on aspiration' that many British people seem wedded to, will manage to bury what could be a transformative idea.

1 comment:

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