It is sometimes said that people in the UK are obsessed with owning property. Maybe, but what is more worrying is the obsession with the idea that rising house values mean that people are wealthier.
We have all heard the assertion – if you bought a house for £4,975, it’s now worth £180,000 – aha you have gained £175,000 – wonderful! [Oh and you are also a property speculator!
Two recent news items continue to propagate the myth –
Most home-owners in the capital have seen their property earn more than they do. Small wonder that Generation Rent struggles to find anything it can afford.
In a sense, the housing crisis plays into that wider public view that Londoners, and in particular the ‘Westminster-elite’, are coining it – while the rest of the country struggles to pay the electricity and gas bills.
Revalue property from 1991 values , introduce more council tax bands
Now for most people a house is somewhere to live it’s not an investment in the sense that buy-to-let purchasers or investors see it. If you bought the house in 1970 and you now decided to sell it you would not gain £175,000 – unless you want to live in a tent somewhere. If you decide to move to a similar property you will pay a similar price – no real gain!
So Londoners who stay in London are not better off, they are not ‘coining it! This is confusing the paper value of a property with what else you would get if as above you decided to find a similar property in London.
Now if you decided to move to a region with lower house prices, yes you would gain – the new house could well be cheaper so you would have some money to bank or spend.
Lets turn to the myth of revaluing properties on the basis that somehow people have gained by not having a revaluation. If you live in an area where house prices have really shot up but your earnings havent, a higher council tax rate would mean you would be worse off. It’s odd how many who adopt a left wing approach to policy ignore the fact that council tax is regressive!
If we look at changes in house prices between 1995 and 2015 (no data available for 1991), what do we find?
Well in Greater London house prices up five-fold, Hertfordshire up 3.7 times, Lancashire 1.8 times. Hmmm. And Cornwall?
Well Cornwall has seen house prices up by 3.4 (the same as Buckinghamshire), so households in Cornwall (who are owner-occupiers) are 3.4 times wealthier? Oh come on tell that to the man or woman on the bus to Pengegon!
What would happen is that if properties were revalued then the postman in Padstow, the teacher in Truro would all be paying more despite not being that well off in terms of earnings. The gainers would be those with high incomes who unsurprisingly could afford the extra council tax!!!
[Of course it might well be that with a revaluation the council tax take would remain the same for properties as their relative position in the valuation index would probably be unchanged. In which case why bother to revalue?].
So we need an alternative funding process. In the past there was support for a local income tax from the Lib Dems but that was quietly dropped! It could be an option again or perhaps we need a combined wealth/income related tax? [If ‘wealth’ is taxed independently of income, low income households particulary in towns like St. Ives will be forced to sell up which would free up housing for – second home owners and more affluent households – is that progressive? We think not!