18 Feb 2013
As often happens on Sunday mornings, I hazily grab my phone, look at Twitter, and spot an interesting new idea that a politician or think tank has floated to deal with an aspect of our housing crisis.
This weekend it was the Mail on Sunday leaking wealth tax ideas from a Liberal Democrat internal consultation paper to be discussed at their forthcoming Spring Conference. The main proposal was for assets – particularly property assets – worth more than £2m to be taxed.
Unfortunately, the proposal threw in suggestions that jewellery might get considered in a wealth tax. Twitter was alive with sneering remarks about bureaucratic snoopers rifling through asset-rich cash-poor widows’ jewellery boxes.
But I was quite surprised at the visceral reaction that some commentators had to the idea of taxing £2 million property portfolios. One MP described it as ‘the politics of envy’, another warned that it would be ‘a tax on aspiration’.
What struck me was how some of the naysayers thought that a £2m property portfolio was within reach of the average person on the street.
That’s definitely not borne out by some of the stats I’m aware of:
Even among older people, the average home value is only £238,000 [PDF]. The average person over 55 would have to own nine homes before they hit that threshold!
Most non homeowners on average wages can’t even afford the mortgage on an average priced home. To suggest it’s anti-aspiration to tax £2m property portfolios is to misunderstand how that most basic aspiration is slipping away from people working hard and doing all the right things. A Lloyd’s TSB’s study suggests that just 0.2% of homes in the UK are worth more than £2m.
Even when you look at landlords, the vast majority (78%) own just one property they let out, so few would reach the £2m threshold. Indeed, the average buy-to-let loan in the last quarter was just over £125,000.
Clearly, there would be lots of practical issues to consider should a policy like this get off the ground.
But the important thing is the message that this kind of policy would send out. It would confirm what a growing number of people are already realising: that ever-growing house prices supporting personal wealth that is tied up in property are not sustainable.
This generation of young people are counting the cost of a decade’s worth of rapidly rising house prices, which are simply too high for a mortgage to be affordable.
Rather like Boris Johnston’s proposal to ringfence stamp duty receipts for building homes in London, perhaps receipts from a mansion tax could be funnelled back into building more homes. Just an idea.