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Report dismisses calls for rises in property taxation, urging policymakers to prioritise building new homes. 

Policymakers should make it easier for people to buy their own home by committing to building 1.5 million new homes by 2020, including the c creation of at least one new garden city. 

A Policy Exchange report examines the barriers to home ownership, including the pros and cons of introducing new land and property taxes. It says that now is not the right time to overhaul the system, arguing that the British pay the highest levels of property taxes in the whole of the developed world. Council tax bills, stamp duty, inheritance tax and capital gains tax have contributed to a situation where UK property taxation raises more than twice the average level in the OECD.

The report does conclude the current UK system of land and property taxation could be improved. However, it finds some of the claims that are made for property and land taxation are unsupported by the evidence. The abolition of Mortgage Interest Relief (MIRAS) – a scheme which allowed borrowers tax relief for interest payments on their mortgage -  as well as evidence from overseas points to the most crucial aspects for housing affordability and reducing volatility as being housing supply, not taxation or subsidy. 

Instead of altering taxation levels, the paper says that the best way of bringing down the cost of rents and home ownership, and dealing with issues such as house price volatility and the wider instability this creates are changes to the planning system. It calls on all policymakers to commit themselves to building 300,000 new homes every year from 2015 – 2020 by:

Garden cities. Voted through by existing local communities, new and attractively designed garden cities will act as beacons for development, creating huge housing and infrastructure projects.

Self build. Councils that fail to hit their own housing targets should have to release land to local people who want to design their own homes. The government could use this self-build model to ensure that councils hit their housebuilding targets.

Alex Morton, head of housing and planning at Policy Exchange, said, “No other developed country taxes property more heavily than the UK. Yet rising house prices and falling levels of home ownership have led to many calling for an increase to land and property taxes. But these issues will only be solved by genuine reform of the outdated planning system, not a tax raid on peoples’ homes. Politicians cannot try to do everything at once and must focus on the most crucial issues. 

“The evidence shows where excess credit and under-supply exist, taxation or subsidy can only have a limited impact. That is why policymakers should ignore calls for a new round of property taxes, and instead commit to spreading the benefits of homeownership and stabilising the UK economy by building at least 1.5million new homes over the course of the next Parliament. This means serious reform of the planning system and creating new ways to deliver housing.”

For further information contact Nick Faith on 07960 996 233