5 thoughts on “Those who benefit from new infrastructure should pay for it”

  1. Posted 08/12/2016 at 10:08 | Permalink

    If we had a tax system related to land value then what you say can be at least partly addressed.

    As for funding infrastructure projects, large ones like Heathrow simply wouldn’t happen without the government being involved, and land being compulsorily purchased. Small projects like private housing could and should be encouraged to be exactly that, private. The UK is unusual in having its new housing stock mostly built by builder/speculators. And this is partly because of difficulties obtaining land and getting planning permission. The latter is a complete nonsense, of course, as we know that a government project can plough through historic buildings, green belt and ancient monuments while the private homeowner can’t even remove a tree or build a wall without consent.

    But in short, I agree.

  2. Posted 09/12/2016 at 03:36 | Permalink

    Unaffordable housing, and the injustice of freeholders reaping what they did not sow, are both symptoms with the same root cause.

    Not one politician or economist has the guts to address this, instead laying the blame on planning, lack of supply, stamp duty or any other such nonsense.

    With the correct framework of property rights, and thus taxation, the market is able to fairly and efficiently allocate resources. So unless the scarcity value derived from resources not supplied by human effort ie Land, are equality shared the symptoms will be economic and social dysfunction.

    Treating symptoms is easy. Tackling root causes takes some guts and integrity.

    If a tax on the rise in land values is good then surely a 100% tax on its rental value is best? They would after all drop the selling price of land to zero, and that of housing to their capital only constituent. Isn’t that supposed to be the aim?

  3. Posted 09/12/2016 at 13:11 | Permalink

    Wouldn’t cutting stamp duty simply encourage another increase in house prices rises? Do we want that?

  4. Posted 09/12/2016 at 19:51 | Permalink

    Not necessarily significantly. However, in an earlier CityAM article I proposed abolishing all current property taxes and replacing them with more coherent taxes which would be the same in total.

  5. Posted 10/12/2016 at 13:02 | Permalink

    According to the IEA, land rental values for housing in the UK is £75bn. Minus Council Tax and SDLT leaves around £32bn to be capitalised into rental incomes and selling prices (as the incidence of direct taxes on immovable property falls on the most inelastic factor first).

    According to Savills average UK house prices are £219K (ONS puts this at £284K) which gives them a total figure of £6.2trn. From which location values make up two thirds of, on average, of that total according to numerous studies, including those by Hilber/Cheshire of the LSE which the IEA regularly cite.

    So £32bn gets capitalised into £4tn. A return of 0.8% which is odd given rental returns in the UK average out at 5%.

    So if SDLT were scrapped, according to IEA figures, this would put selling prices up by £1.6trn or 25%.

    Which is significant in my opinion. However, seeing as two thirds of rental values at 5% gives us a those for location only at £200bn per year, rather than £75bn, it’s likely cuts in SDLT will not see such huge increases in selling prices.

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