18 days left for funding and The Affordable Housing Crisis

Will you help me publicise a land value tax?

Taxing landowners who profit from unearned wealth and speculation.

There’s a growing national movement in favour of a land value tax which will create a fairer housing system by shifting the tax burden where it belongs. The tax could replace all other taxes and would certainly target business rates. It would help stabilise our housing market. It would return to us all the value gained by owners from public infrastructure spending.

Many MPs are behind the idea including Labour’s Andy Burnham, the Conservatives’ Nick Boles, the Liberal Democrats’ Vince Cable and the Greens’ Caroline Lucas. The idea is backed by serious policy research and is supported by progressive housing professionals.

Even Winston Churchill in his day favoured it as a fairer way to levy property tax.

I’m looking for your support to publicise the enormous benefits of land value tax. I want to make a short, punchy, entertaining and engaging documentary that highlights the tax and the ways in which it can help us all.

Will you help?  

http://www.crowdfunder.co.uk/investment/the-taxing-question-of-land-value-1905

www.taxingqofland.org

Today’s Blog 18 days, The Affordable Housing Crisis

So far in this series we have looked at a variety of topics that cover the need for Land Value Tax including, Poverty, Speculation, tax havens and Urban Sprawl.  Today we want to focus on a most relevant concern to the UK at this time.  That of the Affordable Housing Crisis; the crisis being that there is a severe lack of affordable housing for our growing population.

One of the factors we are all aware of that keeps prices high is scarcity.  A lack of available housing brings the prices up.  Why is there a lack of housing?

Since 1976 we have not been building enough homes to sustain our population.  In the UK we have an increase in population of 410,000 people every year. This includes new born, immigrants and people living abroad. From this, it has been suggested 300,000 homes need to be built each year to keep up with demand. This is because 230,000 households are formed a year and we have a backlog of 2 million homes required. for perspective, the last time we were building homes at the  required rate was in 1978,

There is also a case for empty homes to be brought into use, which could alleviate some of the demand for new housing.


Shelter refers to figures collected by the government on empty homes:

there are more than 721,000 empty homes in England, 279,000 of which have been empty for longer than six months. Empty homes are a waste of scarce housing stock and can attract crime and vandalism.

Most empty homes are privately owned. Councils do have legal powers to force owners to bring properties into use, but as they are often very short of resources this can be a slow and difficult process.

LVT gives local authorities the funds to do this, and incentivises landlords to use land more efficiently or sell it.

Affordable housing has come to the foreground over the last few years.  This is because it was being used to mean two very different things.  In the 2010 report from the National Audit Office:

Financial viability of the social housing sector: Introducing the Affordable Homes Programme

Affordable means up to 80% of the market rate:

In 2010, the government announced a new programme to build affordable (which the Department defines as below market price) housing in England – the Affordable Homes Programme (the Programme). The Programme is expected to contribute approximately 80,000 homes through affordable rent and affordable home ownership in the four years from April 2011. Affordable rent is a new funding model, which involves three main changes: housing providers can charge higher rents for affordable housing than previously (up to 80 per cent of market rates), both for new homes and for some new tenancies of existing homes; housing providers finance a greater proportion of the cost of new homes themselves, through increased borrowing; and the Department pays less grant for each new home provided.

According to Housing Voice

The Housing Voice independent inquiry in to the Affordable homes crisis, it is defined:

Our working definition of “affordable housing” is: comfortable, secure homes in sound condition that are available to rent or buy without leaving households unable to afford their other basic needs (e.g. food, clothing, heating, transport and social life).

So what is affordable?  The dictionary definition of affordable is:

inexpensive; reasonably priced

Definition of inexpensive

adjective

·              not costing a great deal; cheap: a simple and inexpensive solution

Definition of reasonably

adverb

·              1  in a sensible way: he began to talk calmly and reasonably about his future  by sensible standards of judgement; justifiably: a constable who reasonably believes a breach of the peace is about to take place[sentence adverb]:it was assumed, reasonably enough, that the murder had taken place by the pond

·              2  to a moderate or acceptable degree; fairly: [as submodifier]: she played the piano reasonably well
inexpensively: ski wear which looks good and is reasonably priced

And what do we do if the market rate is so unaffordable, that even at 80% of the unacceptably high market rate, the term affordable doesn’t really apply?

And what do we mean by unacceptable?  

Well, in the 70s, which is towards the end of the time where the UK was still building enough new homes a year, average house prices were 3 times your income.  Nowadays a home costs 10 times your income. 10 times your income is problematic if we need to have 40% of the value as a deposit to make the monthly repayments affordable. – Have a go playing with these BBC tools to work out if you think mortgage repayments are affordable: Average house price and mortgage calculator.

So we can appreciate that there is a direct relationship between the amount of homes being built and the affordability of the housing.

One answer is that people can move far away from where they live to enjoy more affordable housing, having been priced out of their own communities. This has two problems, that of urban sprawl which we have addressed earlier in this series, and also a problem that house prices rise in the areas that people move to – which can out price the local population setting off a chain reaction of people being priced out of their own communities, causing further urban sprawl and destroying communities.

So how would LVT solve the lack of housing supply and the affordable housing question whilst keeping communities together and addressing urban sprawl??

Yesterday CLASS released a fantastic paper by Andy Hull called ‘In Land Revenue’.

On page 5 is a summary of how LVT would tackle the housing crisis:

Tackling the underlying causes of the housing crisis

In order to resolve our chronic housing shortage without returning to damaging boom and bust, we need to tackle its underlying causes. Foremost among these is our treatment of land. Lack of land supply is the major constraint on housing growth over the long term (Barker 2004). A Land Value Tax set at the right level – high enough to be effective as an incentive as well as to justify the costs of collection – would encourage efficient use of land within the constraints of the democratic planning system, heightening the prospect of housing (and other) development and the reuse of brownfield sites, especially where planning permission has already been granted (Crawshaw 2009). The message it would give is that those who own land should use it.

One if the key benefits of LVT is that it recaptures the increase in land value created by tax funded projects.  Should your community require a hospital, school or train station etc these would be paid for by the public purse and the increase in land value is currently sitting in unearned landlord wealth.  As a nation, are we are comfortable having our earned wealth taxed via income tax and VAT but leaving this unearned wealth untaxed?

We will look into this question later in the series.

Back to the main affordable housing points:       

Land Value Tax will

  1. Tackle the lack of affordable housing supply, partly by raising funds for councils to invest in the building of homes from land value tax revenue and partly by creating incentives for landlords to bring their land into better use.

  2. Tackle urban sprawl by bringing inner city land into better use

  3. Recapture the investments made by tax funded projects that increase the value of the land in the community, including an increase in homes.