Why it’s time to start taxing people on the wealth they accumulate from property The richest people are more likely to get income from wealth and can actually end up paying less tax than those in work

In Britain today, housing tenure is as important a social division as income or class. Ask anyone under the age of 35 what they would like to see happen to house prices and you’ll likely get a very different response to that of a 50-year-old homeowner who benefited from the astronomical price rises of the 90s and early 00s.

When Margaret Thatcher set about deregulating the private rented sector in 1988, doing away with rent controls and making it easier than ever for landlords to evict their tenants in an attempt to encourage more to enter the market and fill the gaps in provision being left by a social housing sell off under right to buy, it was all done in the name of liberating the housing market and giving people more choice.

While she succeeded in creating a booming buy to let sector, this delivered anything but choice. Young people and those on low incomes can’t afford to buy homes and rely on the whims of private landlords who can evict them at any time. Many are forced to pay extortionate rents which have outpaced wages and tens of thousands are languishing in temporary accommodation because there isn’t enough social housing, sometimes for years.

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With every new arrival in Number 10, silver bullets start flying around as they tell us how committed they are to solving the housing crisis. The problem, though, is that they are usually delivering the same tired old message: “We need to build more”. It’s unimaginative and it belies a complete lack of understanding of the problems we face.

‘Landowners have been able to sit back, relax and enjoy windfall gains at a faster rate than wages have grown, while those in work scrape by to afford rents and get themselves into ever more debt’

In recent years, the ease with which someone could go from renting to living in a van because they can no longer afford to pay a landlord, or fall on hard times after an eviction and end up sleeping in a shipping container, while anyone who has bought property can confidently watch its value rise faster than wages, shows the sheer scale of our society’s failure to house people appropriately.

It is this that needs addressing – wealth inequality. It has changed the fabric of our society, perhaps forever, with housing inequality influencing the Brexit vote, and yet it never is addressed. Landowners have been able to sit back, relax and enjoy windfall gains at a faster rate than wages have grown, while those in work scrape by to afford rents and get themselves into ever more debt in an attempt to get on the housing ladder.

Earlier this week the Institute for Public Policy Research called for the Government to tax wealth in the same way it taxes income from work. As things stand, the richest people are more likely to get income from wealth and can actually end up paying less tax than those in work. Data shows half of England is owned by less than one per cent of the population, so playing the property market really does pay. By any other name this is feudalism.

But, what if there was another solution? Not a silver bullet but something that could actually redress this inequality – implementing land value taxes.

The notion that we need to implement a land value tax in Britain is nothing new. It was advocated by American economist Henry George in the late 1800s as a way of reducing economic rents. In the UK, the eighteenth century economist Adam Smith was a fan too, advocating for “ground rents” in The Wealth of Nations. Land value taxes became a key idea for the Liberal Party at the start of the twentieth century with David Lloyd George arguing we needed to “to free the land that from this very hour is shackled with the chains of feudalism.” Boris Johnson’s hero Winston Churchill was also keen on the idea at the start of his career.

Why we need tax breaks for renters

As housing inequality grows, reinforcing Britain’s wealth gap, the case for a land value tax has never been stronger. As Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane argue in Rethinking The Economics Of Land And Housing, the advantages would include reducing the distortions created by investment decisions in a volatile housing market, lowering property prices by making speculation less attractive and making landowners think seriously about how much property they want to hold because of the associated costs.

Of course, property transactions are currently taxed via stamp duty which has had some success when it comes to calming down the buy to let market. But, as things stand, we do not tax the wealth that land accrues over time.

We could go even further. We could also consider tax breaks for renters who, proportionally, spend more of their income on housing than those with mortgages. As the population of renters grows, so too does the number of people spending increasing amounts on housing and getting nothing in return. Of course, none of this would be politically easy to achieve. It wouldn’t make everyone happy, but no solution to the housing crisis will.