Alex Petropoulos is a policy analyst and political commentator with Young Voices UK.
Britain suffers from a plethora of problems: crumbling infrastructure; stagnant growth; soaring house prices and rents; and bankrupt councils. Amongst the gloom, holding out hope for positive change can be hard. However, these issues present an opportunity for unique solutions. High housing costs and broke councils can be tackled simultaneously by allowing councils to charge a progressive property tax on house builders in return for granting speedy planning permission.
Britain’s sclerotic planning system has long been a roadblock to new housing development in the places that need it most. Simultaneously, alongside spiking costs, central government has cut council funding and restricted their ability to raise local taxes. This intervention would address both problems at their root cause.
Councils currently have little incentive to allow housebuilding. It’s just another thing for voters to complain about. More people means greater demand for services and greater costs. This policy would shift that dynamic. Allowing councils to levy a property tax proportional to the estimated sale cost of the property will ensure an influx of desperately needed revenue once the planning permission that delays and blocks so much of the nation’s infrastructure and housing has been approved.
Currently, local taxation is only raised through the flawed system of council tax. Paid by the occupant of a home, not the owner or the developer, owners and developers profit off soaring house prices, whilst renters suffer with increased costs and pay the taxes on the property. Council tax bands also aren’t proportional to the real value of homes. They are based on what the house would have cost in 1991 – even though UK house prices have risen five times their cost since 1991.
Council tax no longer reflects the actual cost of housing. Even though the houses being built may cost more than ever before, councils aren’t getting more money from council tax, leaving little incentive to allow new buildings. But council tax bands can’t be reformed without also changing who pays them. Not doing so would only shift more of the burden onto renters.
Council tax must be replaced by two taxes: a proportional property tax paid by the owners and developers, and a local income tax paid by the occupants. Achieving this would be politically challenging. Britain’s homeowners won’t easily vote away the system that benefits them while syphoning money away from young renters. Instead, we should opt for a small and politically viable step in the right direction: taxing property developers with proportional property taxes.
The estimated sale price doesn’t have to be perfect as the council can always ask for more once the house is sold to an owner. What matters is that there would be an incentive for councils to quickly approve houses to meet the market’s demand. This tax will then be collected monthly until the property is finally bought. A minimum could be set for twelve months.
This new revenue source can bring power back to local councils, solving their budget issues. By running this as an opt-in pilot program, councils can tailor this tax to their local needs. Rather than a one-size-fits-all solution from Westminster, councils could pick a tax rate perfect for their region.
People like local taxes. They know that their money goes into infrastructure and services for their community. Importantly, local taxes should be able to be tweaked and adjusted according to a community’s needs. Council members should be able to campaign on promises to lower or raise local taxes, like this proportional property tax, to reflect what their region needs most – a tax cut or investment in local services.
If a success, this could lay the foundation for a rollout of proportional property taxes beyond developers to homeowners themselves. Councils across the country could abolish the regressive and outdated council tax system and instead bring in their own local taxes. A pilot program like this – only levying this tax on developers between granting planning permission and the house being sold – offers a palatable step in a politically challenging direction.
This proposal only works because of how dire things have become. It relies on both eye-watering house prices, as well as cash-strapped councils. In the words of Winston Churchill: “Never let a good crisis go to waste”. An incoming Labour government could capitalise on this crisis by launching a pilot scheme to allow councils to levy proportional property taxes on developers, once planning permission has been granted. Or, maybe, this could be the much-needed poll boost the current government is searching for.
Either way, this pilot would be a helpful step towards solving many of Britain’s most pressing problems.
The post Alex Petropoulos: Charging builders property taxes could solve the housing crisis and fund broke councils appeared first on Conservative Home.
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Author: Alex Petropoulos
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