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A solution to our housing problems: reassess land value

  • by JW

“The land under my house has increased enormously in value over the past few decades. I did nothing to earn this.” [Martin Wolf, FT]


There’s been quite a debate today about inheritance tax: ‘I’m giving my home to my grandchild to escape inheritance tax, but I’m worried my legacy will be squandered’ and Abolishing inheritance tax would be a mistake for the Tories | The Spectator and Rishi Sunak needs abolish ‘disgraceful’ inheritance tax – YOU VOTED | Politics | News |

Properties by the sea attract higher inheritance tax: How much a sea view adds to your house price and High house prices catch more families in the inheritance tax net | This is Money

“IHT has now become a mainstream tax on ordinary people, largely due to house price increases.” Inheritance tax soars as result of UK’s fiscal drag | Financial Times

Another property story from the last couple of days has been stirring up more debate: Land value reforms among Labour plans to tackle housing crisis | The Independent and The glaring flaw in Labour’s plot to fix the housing crisis and Labour’s compulsory land purchase won’t solve housing issue – Farmers Weekly

As reported by the FT:

Labour is drawing up plans that would force landowners to sell plots for a fraction of their potential market price in an effort to cut home-building costs in England, according to party officials. Lisa Nandy, shadow levelling-up secretary, intends to reform how land is valued when acquired by councils through “compulsory purchase orders” (CPOs), if Labour wins the next general election.

Land worth £22,520 per hectare as agricultural land can on average be worth £6.2mn per hectare with permission — 275 times more — according to the Centre for Progressive Policy think-tank.

The proposals are likely to anger some landowners, especially those with fields suitable for development. But Hugh Ellis, director of policy at the Town and Country Planning Association, a charity, said Britain’s “new towns” programme of the 1940s and 1950s had been successful because development corporations could buy vast tracts of land at agricultural value. He said Labour was “quite right” to look at potential reforms, arguing that property holders had enjoyed “an absolute licence to print money”. “Labour need to strike the right balance with landowners, giving them some kind of uplift but nowhere near the extent that we have seen over the last 15 years,” he said.

Labour plans to tackle housing crisis by forcing landowners to sell at lower prices | Financial Times

The FT’s Martin Wolf has been pushing for some time the need to reassess how we assess the value of land – in line with classical economists:

I have long been a supporter of taxing land value. Such a tax would be economically efficient and morally just. But it has been politically impossible: the landowning interest, which now includes a large part of the population as owner-occupiers, has been too strong. This is a tragedy. Now that western politicians are struggling with low growth, stressed public finances, high inequality, intergenerational tensions and an unstable financial system, they need to consider such a fundamental change in what is taxed...

The land under my house has, for example, increased enormously in value over the past few decades. I did nothing to earn this. It was the result of the efforts of all those who contributed to making London richer, including, of course, the public at large, through their taxes. A large part of the agglomeration value of productive cities is in this way captured by those who happen to own the land.

The case for a land value tax is overwhelming | Financial Times

These pages have looked at this before: A solution to our housing problems: an infrastructure or land value tax – Vision Group for Sidmouth and Campaign for land reform – Vision Group for Sidmouth

Including how the increase in property prices over the last two decades have affected this area: High land values in the Sid Valley – Vision Group for Sidmouth