One kind of land tax may provide an exit from housing trap
Sir, Martin Wolf strikes the right note of resignation in “Buyers beware of
Britain’s absurd property trap” (Comment, October 11). With all three political
parties dedicated to the homeownerist policy of maintaining property prices at
all costs for fear of losing elections, the situation looks terminal. However,
there is some faint hope for the site value, aka land value, taxation he mentions
favourably – if it is in the “from here on” form of LVT which he proposed himself
in “Why we must halt the land cycle” (Comment, July 9, 2010).
A “from here on” land tax sets a datum line and taxes any land price inflation
from thence on, leaving the property owner in possession of the existing value
and the banks with their collateral for mortgages. Any demand stimulus from
thence on would go into the general consumption of goods and services rather than being top-sliced by a household’s rent and mortgage obligations as land, then
house prices, stabilise. Homeowners won’t lose anything except the “something for
nothing” of house price inflation.
Politicians have to take one of the fabled tough decisions, if necessary by
forming an all-party pact to defeat the menace of deliberate house price
inflation. Alternatively, there are well-placed land taxers of cabinet rank in
two of the main parties who should be combining (possibly through an all-party
parliamentary group) for a coalition.