A radical measure to reform housing
Copyright 2000 Scottish Media Newspapers Limited
The Herald (Glasgow)
June 17, 2000
Letter by Gavin Corbett, Senior Researcher, Shelter Scotland.
SO Wendy Alexander has confounded her Section 28 critics and proved that she is a listening Minister. Her revamped proposals on the right to buy for council and housing association tenants, do not, of course, go far enough. But the important thing is that the genie is out of the bottle. The right to buy can now be discussed rationally rather than, as it was in the Conservative years, being locked away in a box marked "sacred".
Much has been said about the profit that is made by people who buy their council house at discount and then sell it a few years later. The average profit made in recent years has been over £20,000. It is right to query that amount and to examine whether discounts should be lower and whether the period over which repayment of discount is required should be longer than the current three years.
But other sources of subsidy in the home-ownership market attract little comment. Let me illustrate. A friend of mine bought a house in Edinburgh for £68,000. Five years later she decided to change lender and got the house revalued. Its value is now £98,000, apparently. During those five years she had carried out improvements worth £5000. That means that the value of her house had increased by £25,000 not through her own efforts but through those of the community or society as a whole.
The failure of society to capture part of that £25,000 is a major leakage of subsidy from the community to the individual, in many cases far in excess of that enjoyed by right-to-buy purchasers. It is, of course, also a major driver of growing inequalities between rich and poor.
Now the Government might claim that we do have a system of property taxation, in the shape of Council Tax. But, writing in this month's issue of Roof, Shelter's housing magazine, the economists, John Muellbauer and Gavin Cameron, describe the Council Tax as little better than the poll tax, because of the disproportionate burden it imposes on poorer households. Its relationship with property values could hardly be weaker.
No doubt reform of the Council Tax will be one reform which Gordon Brown will neglect for now. But local government taxation is a devolved power. And the Scottish Parliament need not look too far for the changes it could make. Buried away in the raft of land-reform proposals is a commitment to investigate land-value taxation. This is a potentially radical measure which would tackle the leakage in the housing market, would stabilise house prices, and would help reduce the gap between rich and poor, about which politicians claim to be so concerned.
Which Government or which political party will pick up that gauntlet?
You can email me at Gavin.Cameron@economics.ox.ac.uk
Last updated: 9 November 2003.
