High house prices not caused by shortage
There is no evidence that high house prices are caused by a shortage of homes (Editorial, 6 August). With over a million properties suitable for housing lying empty in England alone, it makes no sense to talk of a shortage. There are two factors causing inflated house prices: the failure to tax land values; and the ability of banks to create unlimited credit, leading to leveraged speculation in land. In 1970, the average house price (more accurately, it is the land on which it stands which increases in value) was £4,400. Now it’s about £180,000 – an average rise of 9% a year. Speculation depends upon a constant supply of ever more indebted buyers – a pyramid scheme, whose final collapse is inevitable.
A land tax would tax unearned gains from rising values and so discourage speculation and encourage idle resources to be used, cutting the blight of boarded-up properties. It would provide the government with the bulk of its revenue, enabling taxes on income and property taxes, such as council tax, to be phased out. A land value tax is advocated by the Green party, the Co-operative party and even some members of the cabinet.