The Housing Crisis and Land Value Taxation

In submitting our amendment to the motion on Tackling the Housing Crisis (F31), ALTER is not wanting to change anything called for in the policy paper that will, we hope, be adopted nearly unanimously. Our purpose is to remind Conference that we can and must use our existing policy on tax reform, namely Land Value Taxation (LVT), to solve the underlying cause of the crisis.

We call for the commitment in the 2013 policy paper Fairer Taxes, endorsed by Conference that year, to be honoured. This was to conduct “early in the next Parliament …. a full-scale review to look at how (LVT) might best be implemented”. We do not suggest any new tax policies but merely call for FPC to do what Conference asked it to, which we feel is entirely appropriate given the motion’s subject.

The motion points out that “successive governments have pursued policies that benefit homeowners”. However there is no proposal to correct that imbalance between owning and renting. Our amendment emphasises that it is land value and not the value of “bricks and mortar” that is the cause of this fundamental unfairness. It is the major homebuilders and landowners who most benefit: obscenely and without economic or ethical justification.

Governments in England – both Conservative and Labour – have failed to review the grossly unfair Council Tax despite it being the main source of local and regional inequity in housing costs for occupiers. Whilst tax policy was outside the remit of the working party, it should have been able to point this out without us seeking to amend this motion.

The paper identifies the “main drivers of the housing crisis” as principally not overall supply but about:-

  • Provision of social housing
  • Economic prosperity of the area
  • The role of finance.

The last of these was, like tax, outside the scope given to the working party. On economic prosperity the paper limits discussion to the role of planning policy. It somewhat changes “our approach to planning to contribute towards wider economic equality” but of course it is land value which reflects economic prosperity. Without capturing the “unearned increment” that inevitably accrues “in their sleep” (as Winston Churchill said) to all those with title in land, through a tax that fairly allocates the burden, the planning system is limited to land value capture on a relatively modest scale.

During Sir Vince Cable’s period as a Lib Dem MP and ALTER President, the Party saw significant progress in LVT policy development and acceptance. In his Foreword to the policy paper that introduced the Commercial Landowner Levy (CLL) in 2018, he wrote “only by taxing land and not the productive capital above it” would “a major disincentive to investment” be removed. Building homes and the infrastructure needed by their occupiers is investment, yet the economic gain is swallowed up by owners and not by producers.

The ”angel investor” Andrew Dixon who promoted CLL successfully through Conference and was the Founder of the Lib Dem Business Network lists 14 “Key Messages” as his summary to the paper. Although CLL doesn’t cover residential property, 12 of those apply equally to what Sir Vince, in his 2007 policy paper “Fairer Simpler Greener” and ALTER set out in our papers on LVT for Housing, the Hoarding of Housing and a Homestead Allowance. LVT is simple, fair and green.

More recently, the Oxford academic John Muellbauer summarises the message of his paper “Why we need a green land value tax and how to design it”:-

A green land value tax (LVT) can resolve conflicts among meeting climate goals, equity and housing affordability, while reducing intergenerational injustice. Land prices, reflected in house prices relative to incomes, are near all-time records, pricing younger citizens out of home-ownership and affordable rents.

He cites the OECD, which has long promoted policies for land value capture, as saying in 2021:

Relying less on housing transaction taxes and more on annual taxes on immovable property while shifting the base of these taxes from the value of structures to current land prices would bring multiple benefits.

After failing to persuade FPC to follow up CLL with a similar policy for residential property in 2019, Andrew Dixon has turned towards focusing on ‘red wall’ Tories and Labour MPs. He now works through the APPG on Land Value Capture of which Sir Vince was the first Chair (while still Party Leader) promoting reform of Council Tax, Bedroom Tax and Stamp Duty Land Tax, all of which are highly relevant to solving the Housing Crisis. Even without his “Proportional Property Tax” being strictly LVT, it arguably does more than all the ideas in this Party’s motion to tackle the housing crisis. That’s because it tackles the inequities of residential property taxation.

At present, not one Lib Dem parliamentarian is an active participant in the APPG that Vince formed with ALTER’s help. Land Value Capture was in all three main parties’ manifestos in 2017. We will lose the support of younger (under 45) voters unless we resume the lead on this issue.

* Tony Vickers is Executive Member for Planning & Community Engagement, West Berkshire Council, a councillor for 20 years and a researcher on property taxes for 25 years.

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  • Tony writes
    [The role of finance] “was, like tax, outside the scope given to the working party”. It is not however outside the scope of the APPG on Land Value Capture. Briefing papers discussing some of these issues can be found at The problem of rents and Inflation, mortgages and rents

  • Don’t see how LVT will have any impact on home ownership and renting, other than perhaps to further concentrate land ownership and so force owners into rental arrangements.

    From what I have read the decline in homes for rent are more about the regulations around providing rental accommodation than around land pricing.

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