By Joe Cox
An analysis of the dynamic of the market and society is at the heart at everything Compass does. Where are markets failing? Where are they are working? Where should they be restrained and where is competition needed? All these questions need to be debated as we move into a post-neoliberal world.
In our new report “don’t bet the house on it: no turning back to housing boom and bust” we explore one area of market failure - Housing.
As few as 75,000 new properties may be built in England this year – nowhere near the government’s target of 240,000; and Britain is far behind other European countries in terms of the size, design quality and environmental standards of new homes.
This report recognises the problem that the inflated bubble of the housing market created an artificial sense of wealth. That ethos allowed us to ignore the big distributional dilemmas in society; income at the top raced away, while people in the middle saw their incomes stagnate; debt filled the gap.
The report also discusses the solution drawing a number of conclusions including:
* A mixed economy in housebuilding, with Councils, Community Land Trusts, self builders and small firms joining the major housebuilders and housing associations.
* A balanced mix of tenures (ways of owning and renting), including social housing, real intermediate tenures, and an improved private rented sector.
LabourList has been asking for new ideas to rebuild the Labour movement and in this report we call on the government to replace regressive council tax and business rates with a modest land value tax. We think that this would ultimately create a far more comprehensive and stable housing system.
A Land value tax would also encourage sustainable communities, as investment in public infrastructure would be self-financing.
There would be no excuse not to build a good local school, reinvigorate a local park or a better train line. And it would encourage owners to bring vacant property into re-use and reinvigorate our town centres.
There will be 5 million people in need of social housing by 2010, so these ideas are not just for rebuilding our movement, but rebuilding our communities.
Read the full Compass report here.
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that said, if someone reduces you land value in this way, you could also sue them for nuisance (or in more serious cases under the Rylands v Fletcher rule).
Unfortunately, the supply of housing has the dead hand of government sitting on it in the form of the Town and Country Planning Acts (various years) whereby property rights (in the sense that 'every true-born Englishman has the right to do whatever he wants with his property') are very, very restricted.
It is this dead hand that prevents a true and competitive market developing in the supply of land for residential housing and the result is high house prices. Competitive markets usually supply competitive prices.
The middle classes (the Guy Ms of this world) actually love the restriction on the supply of land for residential housing, even as they spout 'free markets', because this restriction enhances the value of the land on which their house sits and a vast undeserved capital gain results.
My MP keeps telling me from time to time that 'affordable housing is a problem' and I tell her that the solution is to scrap the planning laws. 'We can't do that!' she replies.
Middle England cannot have it both ways ; it either accepts a land tax (or an Inheritance Tax) on its undeserved gains, or it agrees to open up a truly open and competitive market in residential housing, with, I guarantee, a substantial drop in the 'value' of its currently desirable house in Surrey 'next to good schools.'
The Tories have committed to changing the law to stop backgardens being designated as brown field and that will the end of back garden infilling as it's called.
You won't be able to scrap planning consent requirements as defence of the environment comes above mass building of homes across our remaining countryside. In fact general policy now seems to be for "localism" which will mean more power to those of us in a "desirable house in Surrey 'next to good schools."
On top of that the land tax idea won't get off the drawing board due to the questions I've posed Chris. The voters will never support it and that's the end of it. Inheritance tax is easily avoidable and the threshold is going up as well. All in all nothing much will change to affect those like me.
If you think all those millions of owner-occupier families are going to vote for or support policies that will see their house prices go through the floor then you are out of touch with reality.
I like pop video's so here's another to put a smile on your face. One For Gordon and Peter.
The problem, as far as I can see; is that as chancellor Gordon started to believe his own spin and actually convinced himself he HAD abolished boom and bust.
And it was this complacency that was directly responsible for the financial crash in the UK! Isn't it the Chancellors job to protect the nation from such economic threats? How can you protect when you cannot even see the danger?
Gordon's delusion of competence is whats put us (and our children, and our grandchildren) into debt.
I just don't know how anyone can support the man any more. If we had had a competent government people wouldn't be losing their jobs left right and centre.
Then reality bit. It did not start in America. It started here, with someone with a ludicrous lingering reputation for prudence, intellectual capacity and morality.
As to the OP, a land tax would be fine but should only apply to any land owned over 5 acres. It should NOT apply to Jo Shmoe in his/her 3 bed semi. Why do supposed attempts to fleece the rich always seem to end up mugging middle/low earners the most with you lot?
And as for building new properties, there is NOT A SHORTAGE. Housing is just simply too expensive - for the moment - for the reasons outlined above. The market has not 'failed', it is working quite nicely at discovering a new baseline for prices. Soon this country will realise you cannot base an economy on selling overpriced piles of bricks to each other.
Seems I was right.
Chris you fail to have an answer for so many of the problems that would arise from your crackpot scheme that it's hard not to just view you as another person arguing a theoretical position that you know will never come about. In other words you can say what you like, propose what you like, annoy who you like in theory because there's a snowball in hells chance of it ever coming about.
The UK has one of the highest owner-occupier rates in the western world. Could you explain how it is in any of these people's interests to support this theoretical position of yours? Are you claiming that all those owning property are part of this greedy bastard tendency?
I have a property on which I paid a larger sum than had I bought in say Tower Hamlets because I was paying for the ability to live in this area and be near countryside and good schools etc. Are you suggesting that not only should I pay a higher property price but then to also pay a higher yearly tax because I chose to live here?
Can you explain in what way I am "excluding" anyone by owning my nice little house in Surrey? Have I stopped anyone else buying property? Have I prevented them walking down my street, shopping in the same shops as I do or visiting the nearby countryside?
What you propose is total nonsense and will never happen because the vast majority of the country and the legal system for hundreds of years recognise there is nothing wrong with an Englishman owning his own home. He takes the risk in purchase, ownership, stewardship and maintenance and thus is afforded the priviledge of peaceful ownership.
I won't bother with your ramblings on company format etc. other than to say the first sign of the UK trying to bring about these crazy ideas and PLCs would be off like a shot takng their jobs and wealth with them.
In fact the first sign of your property ideas moving towards enactment would cause a melt down in the home owning property sector and a flood of capital abroad.
If it looked like you ideas were to come about I'd sell my UK home, rent a cheapalternative and move my capital abroad to purchase property. in other words I'd do everything I could to avoid the implication of your marxist-light property proposals. I'd suggest there'd be a great many like me.
Whenever Labour look to solve a problem it always involves yet another tax of some sort. Just a party of thieves nothing more, nothing less
"The UK has one of the highest owner-occupier rates in the western world. Could you explain how it is in any of these people's interests to support this theoretical position of yours? Are you claiming that all those owning property are part of this greedy bastard tendency?"
You ignore entirely the fact that the UK has a collapsing housing bubble and an almost cosmic and increasingly unsustainable debt burden. I hate to tell you this, Guy, but Humpty is not going to be put back together again by the Tories or Labour.
A large and increasing proportion of the "owner/occupiers" are staying in "their" property purely by the grace and favour of banks and building societies, and in many cases have literally become locked in and unable to move.
A "co-owner" has the indefinite and exclusive right of occupation for as long as he pays a "Capital Rental" to investors. If he chooses to invest in the property by buying units he will eventually own sufficient for the income from them to offset the rental due.
ie in economic terms he becomes the owner, and the outcome is indistinguishable from a freeholder who has paid off the mortgage. The difference is the cost of getting to this point, and the fact that he never has a mortgage shackled around his neck.
It is the relationship between the financiers and user of finance that co-ownership changes drastically, and for the better IMHO.
"I won't bother with your ramblings on company format etc. other than to say the first sign of the UK trying to bring about these crazy ideas and PLCs would be off like a shot taking their jobs and wealth with them."
There had been as of this week almost 48,000 LLPs incorporated, and the number is increasing rapidly. These are already being used by many Plc's to outsource many functions, and there is no reason why that should not extend to finance.
"In fact the first sign of your property ideas moving towards enactment would cause a melt down in the home owning property sector and a flood of capital abroad."
Enactment doesn't come in to it. Individuals and businesses will either participate in the sort of LLPs already emerging or they won't. The Hilton group did, to the tune of £1bn pounds worth of hotels. What do they know that you don't, Guy?
City of Glasgow is a member of four municipal LLPs with private sector partners. Do you have a problem with that?
If I'm right, those who participate in co-ownership are at a competitive advantage to those who prefer to pay returns to "unproductive" credit intermediaries; rentier shareholders or landlords.
My proposals are entirely consensual. No law change is necessary for their adoption.
So by all means pull up your drawbridge on your own little castle, or poddle off to Jersey.
We won't miss you!
At the end of my mortgage I own my property and I won't be exchanging that reality for a "co-operative" solution.
Last month house prices rose again and those people staying put in their property at the moment will just see things out and then move again. You are deluded if you think that is going to change.
Millions of UK citizens are property owners and they won't be switching to co-ownership voluntarily and your chances of legislating to force them into it are non existant.
As for the PLC, no large and few sme's are going to transfer to your form of doing business. Government is not going to penalise PLCs so once again nothing will change.
I'll keep doing what I do, enjoying the full value of my property and there' nothing you can do about it.
I note though that you have no answer to what happens when people start opposing developments they personally dont need in order to stop their land tax going up?
You can make your ideas voluntary in which case they stay in a minority and dont go near touching most owner occupiers of hmes or you can try and enforce it in which case you get defeated. Your choice.
People may well oppose developments for all sorts of other reasons, but only complete idiots would oppose a development because it increases their land value.
The reason the tax goes up is of course because the property is more valuable.
Not wishing to pay tax on an unearned gain is what qualifies people as members of the Greedy Selfish Bastard tendency.
The concepts I advocate are entirely voluntary.
Don't you understand the word "consensual"? I must have used it a hundred times.
But anyone in or approaching negative equity (millions of them, and increasing by the day), and anyone wishing to release equity (more than £1 trillion of UK property is held free of mortgage by over 65's) will have every incentive to use Co-ownership.
This is because it gives rise to better outcomes for them.
Maybe you'll be looking to release equity in Chateau Guy one day, and I bet a pound to a penny you swallow your pride and use the mechanism that gives you the best return.
1 Current taxation policy is to tax at the point revenue is obtained i.e. taxation of salary when paid, taxation of dividends when paid, taxation of stamp duty when property bought, taxation of vat when goods are bought.
With your land tax policy taxation would occur when a notional improvement in value occurred. There would be no revenue or increase in income realised just a notional increase in property value that would be paid at some time in the future.
In other words you are increasing taxation at a point where thesre is no increase in revenue.
Is increasing taxation on that basis acceptable?
2 For anyone retiring on a pension their income is not going to increase significantly. But over the course of their retirement the land tax may increase due to improvements around them.
If the only way to realise that increase in value is to sell their house (and incure property taxes and associated costs) how do they pay the increse in tax? They may well havve to sell the family property in order to meet the increasing tax bill levied on them. How is that acceptable?
3 How is an increase in value calculated? Some civil servants wandering around making unchallenged assumptions? What happens if the assumptions on increase in value aren't realised out when the property is sold? Is there recompense or have you been taxed for a notional increase in value that has never materialised?
How is that acceptable?
Answers Chris?
1/ Taxation Mechanism
Since I agree with you that a land value tax is politically unimplementable, I will only say that the most plausible solution to this problem I have seen is for the tax liability to be allowed to roll up for those unable to afford to pay it as a revenue item.
This rolled up tax liability could be subject to a nominal rate of interest and secured against the property of course. The government could then borrow against this accrual.
But it's an academic question, because like you, I don't see LVT as implementable.
Using "co-ownership" on the other hand, individuals could pay the levy in "Units" instead of sterling if they prefer, or if they have no other option.
2/ Pensioners
My answer to 1 also answers 2.
As I said elsewhere on the thread, "co-ownership" constitutes the best "equity release" mechanism there is. It wipes the floor with other mechanisms.
If a pensioner has insufficient income to stay in a large "family" house, which the kids are likely to inherit, then I am sure that between them they can come to a solution to cover the costs of living there.
3/ Market Value
There's no big deal to valuing property. Most countries have an office that deals with it pretty competently, and we are no different.
Valuation Office Agency
The methodology of these valuations typically concerns land rental values, and the replacement cost of buildings. The market price of your property is essentially the capitalised rental value of the land, and the capital invested in the land.
It's the amount and nature of the property tax liabilities that result from these valuations which are the political issue.
At the end of the day, there is also a market price for sales and rentals and there are websites these days that enable a very shrewd guess at the market prices to be visible online.
But you are missing a point here, Guy, which is that LVT is a continuing charge on the land rental value. It has nothing to do with property sale transactions, which makes your otherwise not unreasonable questions redundant.
In the co-ownership model on the other hand, land is never sold again, being held by a custodian (as is the case with all institutional securities).
Occupiers may change; investors may change; and the manager (if there is one) may change, and service providers will perform a valuable service by bringing together occupiers with properties, and investors with investments.
"The bubble created an artificial sense of wealth that was used to compensate for relative wage suppression and a declining pension systemas it encouraged people to borrow more against rising paper values of their homes."
Yes, their wages were/are suppressed because Brown took every spare bit of tax he could throught stealth taxes and fiscal drag. So the people borrowed more, there's message in there, too much borrowing was the result, look at the cause.
Here's one root of the problem, immigration, both recorded and illegal immigration. We can't stop other causes like more people getting divorced and living separately or people living longer, but we can stop immigration that is driving demand for extra housing.
Also we can't just keep concreting over land, it's why we have flooding and it damages the environment and ups pollution levels, land, plants and trees are our lungs.
Affordable/social housing is not the solution. I have it in my village, very nice for the long term villager's kids, they get a nice cheap house that they sell on at a vast profit some years later. Now you're back to square one, as the grandchildren now want an affordable house. Council houses are the best solution (yes I know it was a Tory government that flogged them off) and I can't understand why a Labour government hasn't built any.
Of course it is. But you have to make sure you don't sell the land.
But the right to occupy does cease when you die (unless you come back and haunt the place).
It then depends on who the "occupier" is, in that like an agricultural tenancy it would definitely pass to a spouse, and possibly to children too.
That's configurable.
I agree totally with the principle of Land Value Tax that those who have the privilege of exclusive use of the Commons of location/land should compensate those they exclude.
Unfortunately, against the tidal wave of propaganda and misrepresentation the idea would face - funded by the privileged incensed at paying for their privileges - then as a policy it has zero chance of implementation.
I believe that the principle can only be implemented as part of a new approach not just to taxation, but also to tenure and property financing.
I set out here a new form of investment in land I call Co-ownership
Using this Co-ownership model we may actually achieve a new route out of the Credit Crunch by replacing unrepayable secured debt with a new approach to "Equity" within a partnership, rather than a trust or company framework.
Within that framework, a payment for the use of location - as distinct from the capital invested in the location - could be simply introduced.
This lecture in Ireland last year illustrates the partnership approach
Equity Shares: a solution to the Credit Crash (Presentation)
and
Equity Shares: a solution to the Credit Crash (The Movie)
Another method of screwing revenue out of the population. Albeit a different sector of the population.
Tell me who do you refer to as being excluded in your comment above? and why should they be compensated -
is that to say that effectively I am excluding my neighbour from dancing accross my lawn and as such
I hand over some money to the revenue.
What privilege is there to the use of land that you allude too?
If I do not own the land then who does, who do i purchase the right to use the land from? Who is the arbiter of land use
If I am happily living in my house paying my taxes, it cannot be right for someone to build a facility near by (over which I have no control, no say and may not even benefit from) and for that to 'increase' the value of my land and so put up my taxes (maybe unaffordabley so).
If having the jubilee line built nearby was going to put up my taxes, then I should be entitled to stop it being built...
What's your problem?
The notion that any development is of equal worth or benefit to everyone nearby is total stupidity.
Further if faced with an increase in tax due to say a tube line extension anyone not intending or needing the tube line would likely be automatically against it.
Perhaps Chris Cook is also arguing for no local say in property development as well?
Certainly from my point of view I'd oppose any development nearby if it wasn't of use to me i.e. schools, shops, bus routes if it meant my land tax going up.
It's a stupid theory and he knows it.
What part of that proposition do you not understand?
So when a new school increases your land rental value by £100 per year what would be your problem with paying (say) £10 of that, other than a fully paid up membership of the Greedy Bastard Tendency?
And of course you should have a say in local development. That's your democratic right, whatever Tendency you are a member of, and I don't think that's is in much doubt.
A country is defined by its borders and those borders are kept secure for the security of the citizens (apart from labour throwing out people out to the mercy of foreign courts of course) - as a birthright a citizen should be automatically entitled to a use a share of his nations land (1/245 km^2) in return for a fixed rate of tax (maybe, notionally, 5% of the value of the crops that could be grown on it or some such) - clam your land (when/while/if you want to) pay the tax, claim the land let it out, pay the tax, pocket the difference. When you die any land you had returns to the state.
It would (of course) mainly be a paper exercise in practice - but as a principle I quite like it.
I fully support property rights, but there are historic inequities...
Like the scottish tenant who asked the landlord/estate owner "you own all the land as far as the eye can see - how did you get it?" the reply was "my great, great, great grandfather fought for it and won it" to which the tenant says "OK, tell you what, I'll fight your for it now - how about that?".
Essentially a "National Dividend" paid as of right from the "National Equity".
Indeed.
That sector of the population who have received a transfer of wealth through the toxic combination of money created as interest-bearing debt, and private property in location/land.
"If I do not own the land then who does,"
You don't own the land: you have the absolute exclusive right of use of it at Her Majesty's Pleasure and don't you forget it.
If you die intestate and without any family she - or in Cornwall, her sprog - gets it.
There are many cultures who cannot conceive that land could possibly be owned by anyone: others believe that absolute ownership of land is God's alone.
We are accustomed to receiving a free ride from the rest of Society so that when - for instance - the Jubilee Line was extended at a cost to the taxpayer and ratepayer of £2bn, then people who lived along the route saw a windfall gain of £17 billion.
You clearly think that windfall is fair. I don't. I think capture of a part of it can and should fund necessary infrastructure.
In Denmark they raise around 30% of tax simply and pretty painlessly - other than to the Greedy Bastard Tendency - from a levy/tax of around 1% on land value.
In Hong Kong it's not even a tax -it's a Rental (formerly a Crown Rental), because most land there was leased - and it raises maybe 35% of revenue (which otherwise would have come from more regressive taxes) simply, unavoidably, and again, painlessly except to the Greedy Bastard Tendency.
In the model I advocate, land title nominally remains with a "custodian" (as it currently does in a way) but the rights and obligations that together comprise the property relationship are divvied up more equitably and sustainably than now, within a partnership framework.
At least, I think it's more equitable.
Maybe - possibly because you are a card carrying Member of the Greedy Bastard Tendency - you don't.
I'm sure you'll let me know.
"
I absolutely think it is fair - property owners should be compensated if part of their property is
appropriated by the state for any purpose whatsoever. You would be expected to be compensated if any other item or property was appropriated from you
Of course it works the other way as well so that an owner/occupier should be compensated for actions of society that adversely affect him.
But my point is that house owners should contribute from their unearned gains to the public expenditure that gives rise to the gains.
If a private company builds something near by that increases the value of your property, shouldn't they get to tax you for it?
But I would argue that private enterprises could and should apply to local Treasuries for the necessary credit (based upon the land tax income) for such (by definition) productive and publicly beneficial investment.
The entrepreneurs don't need rentier shareholders for that, while service-providers-formerly-known-as-banks would manage the process, not intermediate it.
to it, but you buy it in its entirety including the air over it and the earth below it.
Why should I be additionaly taxed because of that. Working on the principle that some people do not own land,
which was the tenet of your argument. Tax those who have because there are people who have not. I quote "those who have the privilege of exclusive use of the Commons of location/land should compensate those they exclude"
In fact you dont address all my questions - who is the arbiter - who defines who can use what and for what purpose. If I owned land I am the arbiter, I define the purpose to which I put it - within the rules specified.
It is plain and simple - people do not have a right to own land - or to be precise they do have a right to own
property but only if they can afford it. Iwant a helicopter but hey - I cant afford it so I cant have one -
doesnt mean that everbody who does have one should shell out because they exclude me from their helicopteredness
Incidentally I am not a landowner but am happy to protect the rights of those who are.
Why do you lump me with your 'Greedy Bastard Tendency'? I dont understand that bit!
The intestate rules that you mention only apply if you have no traceable relatives see http://www.youngandpearce.co.uk/intestrules.htm
It is a common misconception that Property is an object or thing. In fact, as Bentham pointed out, land (the asset, object or thing) is not actually "property" but rather "the object of a man's property" or something that is "proper" to the man.
ie Property is a relationship consisting of the bundle of rights and obligations that connect the subject (individual) with the object (land, in this case).
You never actually buy land absolutely - you acquire a right (fee simple) to exclusive use of a location nominally owned by the Crown. Your right is conferred by statute law, and is also subject to a body of judge made law eg so called "equitable" rights such as trusts and all sorts of other statutes affecting what you can and can't do with "your" land.
"who defines who can use what and for what purpose"
Our democratic process has laid down much of this definition. We are then free, within that framework of statute law, and judge made equity, to make such other agreements as we see fit.
These may be contractual rights. So for instance I have the contractual right - as a member of a housing Coop constituted as a genetically modified company - to occupy a property "owned" (well actually occupied under licence) by the Co-op. Our rules provide for "arbiters" of disputes in relation to occupation.
My approach is to use a simple but radical new corporate vehicle as an "envelope" for property rights.
"Why do you lump me with your 'Greedy Bastard Tendency'? I dont understand that bit!"
I didn't.
I left it to you to confirm or negate that suspicion, which was brought on by your combative starting point.
I believe that the concept of "Co-ownership" does indeed go to the very fundaments of the property relationship - it enables a new form of tenure of indefinite duration - and in so doing opens up IMHO some remarkable opportunities to rid ourselves of an enormous baggage.