Could a Mansion Tax make our housing markets even more dysfunctional?

July 15, 2014 12:54 PM

In today’s Daily Telegraph Jeremy Warner makes two very interesting points on the UK’s housing market dysfunctions and some commentators’ hopes that a Mansion Tax will do anything to fix them:

Britain already has the highest property taxes in the OECD (see chart), mostly in the form of council tax. Some claim a higher purpose to property taxes than merely soaking the supposed rich – that of putting a lid on property prices. If that’s the hope, then it is equally misplaced, for such taxes plainly haven’t done much good so far.

 

As for so-called “granny” clauses, allowing the elderly to roll up their liability until death, this hardly solves the problem. The eventual fire sale of baby boomer homes would only further undermine house prices down the line.

The answer to a dysfunctional housing market isn’t a Mansion Tax. It’s meaningful, effective planning reform. As Mr Warner rightly says:

There is only one proper solution to this problem – a sustained increase in supply. The tinkering we’ve seen to date with the planning laws is not going to bring it about.

Back in February 2013, our then Chief Executive Matthew Sinclair wrote for Spectator Coffee House about why a Mansion Tax is such a bad idea. That case is every bit as valid today.

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