We have a similar issue in the UK since there are large houses being occupied by older couples whose children have left. Since annual property taxes are low (~4k - we call it council tax) and tax on buying property (stamp duty) is high, there is no incentive to move to a smaller place.
Equating council tax with property tax is extremely misleading imo.
For the benefit of people not from the UK: Council tax is effectively a bill for services & utilities paid by the occupier. Cost differs slightly based on overall property value but that's not super helpful for renters.
Property taxes would be levied on the owner, and be directly tied to house value.
For what it's worth I believe we desperately need property taxes to put and end to the situation you describe, amongst others.
But the UK has a fetish for homeownership, culturally people are convinced they _must_ own a house or multiple, and so many homes were practically given away for free by past governments.
Any Government trying to implement policies that try to fix our housing crisis will be voted out almost instantly by a class of people who do not care what is for the public good, only that things benefit them.
It's true that council tax is paid directly by renters, whereas in the US renters only pay property tax indirectly via rental cost.
However, from the point of view of the housing market they are comparable. They're both an annual cost to holding real estate... and in the UK it is very low.
In all countries there are plenty of older homeowners with a surplus of space. Most people don't want to move out of their home if they don't have to, even if it is now larger than they need. However it's even more so in the UK because the system incentivises people to stay put.
I feel that it was not "extremely misleading" within the given context which referenced older couples in larger properties. In this case, they are the ones typically paying the council tax.
I agree with you that the UK needs property taxes to be paid for by the owners. This would help reduce speculation and encourage utilisation of the existing housing stock. But as another post has mentioned, objections include "think of the old people who are worth $1m+ in property but would have to move out because they have low income"....boohoo...
You need to be careful when dismissing caution about the elderly who have - through whatever means - found themselves living in a valuable property. The following are just as likely:
- a wealthy individual with many properties who can easily afford a few extra hundred quid a month
- someone living just above poverty level in a property in a previously modest area that, thanks to a gentrification, has exploded in value - and would to move out if their tax band was bumped up a bit
We cannot just dismiss the plight of the latter simply because we want to disincentivise the former.
I'd like to add that the vulnerable (including but not limited to - elderly, long-term unemployed, immigrants, disabled) in the UK have already had to deal with cuts in local services as well as periodically being labelled by the government and the press as lazy or pathetic or scroungers. I'd encourage anyone to resist anything that could be used to further victimize or immiserate them - even if it is just in the form of a casual tweet or comment.
Edit: My last paragraph really sounds a little harsh on re-reading. This is because it was meant to be an "as an aside" comment and not accusing Blackstone4 of anything sinister! I'm generally in favour of taxing the rich and powerful.
I think if someone is in a huge house they're barely using and possibly not even maintaining, there isn't a massive issue with gently incentivising them to move somewhere smaller.
There especially isn't an issue with a redistributive land tax rather than a property tax. That would take money from corporate landlords and move it back into the rest of the economy.
You have to balance your caution with the reality at the other end - which is people living in slum conditions and/or sheds, or being homeless.
If it’s a case of seizing unused or poorly maintained mansions from the super-rich and turning them into Council houses then I am on board. But to me it sounded like we were talking about old people living alone in 3-bedroom houses they used to stay with their families
And you have to balance your optimism with the fact that your solution will cause lots of old people (who maybe should have downsized 10-15 years ago) to be forced to downsize now and who would then lose the ability to live independently.
> There especially isn't an issue with a redistributive land tax rather than a property tax. That would take money from corporate landlords and move it back into the rest of the economy.
I commend you for being honest about such a tax: it is indeed someone (perhaps those who call themselves "the authorities") taking what is not theirs. Taking it, without permission.
I disagree that noble ends can justify such means.
> But as another post has mentioned, objections include "think of the old people who are worth $1m+ in property but would have to move out because they have low income"....boohoo...
Cruel. There are plenty of old people that are able to keep living in their existing home because it is familiar but would be unable to live independently in another home.
I guess it depends on your perspective. It may mean pain for some and relief for others with a view to moving towards a more optimal solution for society as a whole. How can we use our housing stock more effectively?
As things stand, people defend the status quo when young people and those on lower incomes are struggling with high rents and property prices. Some have kids and have to share rooms and live in small properties. Others may end up debt slaves for the rest of their lives.
>There are plenty of old people that are able to keep living in their existing home because it is familiar but would be unable to live independently in another home.
If they have a net worth of $1m+, I'm sure they can afford to pay for care. I am not talking destitue, improvished individuals.
> If they have a net worth of $1m+, I'm sure they can afford to pay for care. I am not talking destitue, improvished individuals.
Except that you are. There are plenty of old people in London and the South East with very modest pensions that live in homes that have exploded in value through no fault of their own. They are not wealthy they just happen to live in a home that has become expensive.
I don't know if you have seen how confused a someone with dementia becomes when you move them to a new environment but it can be pretty horrible. And cheerfully saying that now this formerly independent person has to now pay for care because you took a policy decision is cruel.
The solution to a problem with society is not to hurt other people. This isn't a zero sum game where pain should be apportioned. We could actually come up with solutions that help everyone. Like simply building more homes...
> Property taxes would be levied on the owner, and be directly tied to house value.
Property taxes don't necessarily fix the issue though, because the property value is usually re-evaluated on sale, so the property tax increases drastically at that point.
That's an implementation concern which can be addressed through data/analystics. i.e. a record can be kept of the size of your house in sq ft and property taxes adjusted for recent sales in the area.
It’s not so much a fetish for home ownership as a reflection of bad incentives. Renters have few rights and embarrassingly owning a home is often actually cheaper even in ridiculously valuable areas.
True, in Indiana; renters only recourse when the landlord refuses to maintain a property, is to move out.
They also have to justify it to the judge or live with a black mark on their credit. This, like an eviction, will make renting almost impossible in the future.
>Property taxes would be levied on the owner, and be directly tied to house value.
That is awful, why would you ever want to introduce such a regressive policy? Higher density construction generally costs more than low density construction. Each floor adds more cost because you need proper ventilation, elevators, stairs, etc. Therefore an apartment will be taxed more despite having the same number of square feet/meter. Despite this, apartments still make sense economically if the land value is high but if you're burdening them with yet another heavy tax then people will shift to single family homes instead.
Then there is the fact that you should never tax someone for improving their house. Oh you installed solar panels on the roof for $30,000? Lets tax that! The solar panels are no longer a net gain. Homeowners no longer have a reason to improve their homes. Imagine someone working on his house in his free time. At that point you're taxing someone's free time. How backwards is that?
Stop taxing property value. It's regressive. It's a moral hazard. It doesn't work.
If you want to tax something, then tax the land those buildings are sitting on.
Bonus content:
And since for some reason grandmas are the most important members of a gentrifying city we can even take a look at what happens when they get priced out from a property tax vs a land tax.
Grandma sells her overpriced home because she can't afford the property tax: She can't move into an apartment because the apartment is taxed even more than the home she left.
Grandma sells her overpriced home because she can't afford the land tax: She can move into an apartment because the apartment is taxed less than the home she left.
What about the headache of maintaining a big home? I've seen what it is like to care for a large home. It's a nightmare, whether you have money or not. Every pool, every gymnasium, every commercial-grade appliance, etc. They all require maintenance, repair, and eventual replacement. To do that, it costs a lot more and the available labor is much more limited. You have to wait weeks for some guy who lives two states away to come in and work on your elevator and when he gets there he charges you an unbelievable amount of money to do basic things. And when things aren't broken, you have to always be renovating or updating something. Things that look like they are aging or out of style don't signal your status because they tell your guests and visitors that you have a big home, but maybe can't afford it. So you're always updating. Always renovating. It's all a show.
The idea of dealing with all of these "luxuries" is awful to me and I've seen wealthy people who didn't have to work basically turn home maintenance into their job because it required just as much time and stress as anything else. What is the point of wealth if things you use it for give you just as much headache as a middle class person's job?
The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place.
The UK's problem is not so much lack of houses (although the planning system really doesn't help) as a combination of over-financialisation and over-centralisation. People believe that all the high-paying employment, entertainment, and oligarch money is in London. It's also the default destination for immigrants. As a result you've got people trying to live in sheds there. Meanwhile everywhere from seaside towns to Birmingham gets treated as second-class citizens, with inadequate public transport and little inward investment.
It’s largely internal migration driving that effect in the UK, not external migration or financialisation. Children go to university and never come back. The good jobs ARE largely in London and the South East, and people follow their friends creating a network effect too.
It’s also not new - it’s been going on since the end of the Second World War pretty much.
Well, yes. Each individual is only doing what's best for their circumstances. What I'm questioning is whether this is how it has to be, this centralisation, and whether good jobs could be distributed round the country a bit more by some policy choices.
Yes, London’s population shrunk into the late 80s as people moved out of city centres but the South East grew very quickly in the postwar era - more than offsetting this effect. Since the 90s, both have been growing.
Housing costs aren’t insane in the commuter belt if you have a decent job in London. Most people working in London don’t live in London. Good job in London, house in the South East, commute by train, still looks better to a lot of people than poor job in a rural area of the North or Wales and getting a less good house.
Of course there are some professions where the equation works the other way - medicine being one obvious example.
> The UK also has Stoke-on-Trent giving away houses for £1 in a desperate attempt to unblight the place.
I'm kinda curious what you mean by this?
I just did a brief (didn't look at all areas) google maps tour of the area, and while I know that isn't in any way the best to assess an area, I was struck by a few things:
1) Things seem pretty quiet - little vehicle traffic, but also few people walking about, even in the "city proper".
2) Buildings seem fairly diverse; some newer, some older. Most in seemingly decent shape; a few in need of repair.
3) Some interesting shops and restaurants (saw one small restaurant called "Planet Bollywood" - heh).
4) Housing neighborhoods and such seemed and looked nice.
I guess what I'm trying to get at is that I didn't see anything that looked like "blight"; maybe I didn't look in the right areas, or maybe my concept of blight is different?
When I think of blight, I think of empty lots with weeds chest high, trash dumped, broken down and/or burned out buildings, etc - stuff in extreme states of disrepair or needing condemning and removal/cleanup.
I didn't see anything like this; but again, I didn't look everywhere. Where I did look, the worst I saw was perhaps some buildings that needed some basic upkeep and maintenance (at least, from the outside).
The UK's problem is not so much lack of houses (although the planning system really doesn't help)
It really is a lack of houses. It's true that some residential buildings are not being used to full capacity. It's true that we are far too centralised around London in some respects. However, those are still relatively small effects compared to building ~100,000 too few new homes every year for decades as demographic and lifestyle changes are rapidly increasing demand.
You're right that the planning system really doesn't help, nor does the ease with which the big housebuilders routinely manage to bypass it so they can build and sell the high-end, high-profit properties without providing the balancing low-end, lower-profit ones and supporting infrastructure at the same time.
It also doesn't help that our education system has pushed people away from practical trades. There are nowhere near enough good independent tradespeople for individuals to conveniently build, adapt or extend their own homes instead of buying the over-priced, mass-produced junk that big housebuilding firms typically offer these days. In some places elsewhere in Europe, people designing and building unique properties for their own needs happens all the time. In the UK, it's still rare enough to be a conversation starter if you meet someone who's actually done it.
Of course the problem now is that a significant number of people have treated property as an investment vehicle, intentionally or otherwise, and stand to be financially ruined if there is a big crash. Meanwhile, prices have literally become prohibitive in many cities and other relatively popular locations for the younger generations who are flying the nest and looking for their first home or wanting somewhere a step up the ladder to settle down with a partner and perhaps start a family.
The only way I can see to cool the market without causing economic disaster is a slow erosion based on building a more realistic amount of housing stock so market rates naturally fall over time. But of course the big builders and mortgage lenders really don't want that, and the system is stacked against the little guy who wants to go independent for the reasons above, so without disrupting at least one of those groups, nothing changes and the problems just get worse.
That was one of the advertising, rather than real justifications for getting rid of the rates - which was on ownership rather than occupation, and replacing it with first the poll tax - and we know how popular that was. Then council tax.
It was nothing other than a massive subsidy for the most wealthy as the top band is reached so early - it's only slightly less regressive than the poll tax was. The Tory campaigns were built around how "unfair" it was for the old widow or couple, who'd worked all their lives, to pay the same as a family of 5. No mention that no one in their right mind thinks a widow still needs a 4 or 5 bed house.
Double bonus: In bringing in council tax local finance could be massively further centralised, weakening the regions even more.
It's really surprising how little push there is to get shot of council tax, bring back rates or some properly progressive tax.
Part of the idea of the ‘poll tax’ was also to increase accountability of local government by making it more transparent - ‘why do you charge twice what the neighbouring council does?’
Council tax actually is relatively progressive when you consider that council tax benefit is also part of the system. Very few areas have a large number of band H homes - parts of central London do, but even there you might be surprised how small a number you’re talking about - there are only c15k in the City of Westminster for example, the borough which includes the whole of Mayfair and Belgravia.
The difference between a multi-million pound mansion owned by an offshore holding company on behalf of a billionaire and sort-of-okay almost affordable housing is usually only a few hundred pounds a year.
And accountability has clearly not been improved in any way.
In fact billionaires rarely pay council tax at all because councils rarely chase them. There's no point sending bailiffs to an empty property protected by professional security owned by a company with an offshore address that's effectively immune to any form of legal action.
How many multi-million pound mansions owned by billionaires who never visit do you think there are in the UK? It’s a tiny tiny number in the context of the country as a whole.
And councils can and do apply to the court for charging orders against the property itself, then force a sale. Offshore companies as owners are not immune in any way.
So it was alleged. The exact same transparency was there in the domestic rates, as the levy was on property value. Rates had one big advantage - houses don't move around much. The overheads of collection are minimal.
The truth, of course was removing a tax on the wealthier, and drastically cutting the amount of revenue councils were able to raise locally. A good part of how we ended up with one of the most centrally controlled systems there is. Westminster decides how much funding councils get, council tax tops up a little of it. A "blessed" council can charge lower taxes through receiving higher central funding.
A welfare benefit that only some are eligible for and requires retrospective claim does not make a tax progressive. Especially with how broken the welfare system has become for those needing to claim whilst working. The absolute numbers matter little.
> ‘why do you charge twice what the neighboring council does?’
It turns out that most council costs are things they are statutorily obliged to do, and rate rises are capped by the government, so council tax rates are largely an indicator of the ratio of taxpayers (including businesses) to service users.
Well, yes. A lot of things are done at local authority level for no good reason - although it’s also true that relatively little of that is services where they have zero influence over the cost - they can spend efficiently or inefficiently and offer gold plated services or bare bones. The system was more transparent than comparing band D tax which is what happens now because some local authorities are mostly low band stock and some mostly high band, and that in turn is more transparent than the old rates system.
The UK has a different issue.
The size of the homes is just absolutely tiny even for the same number of bedrooms it has been shrinking and it shrinking still.
The houses in the article aren’t Victorian era detached houses that are being hogged they are fairly new built homes just big ones.
Also council tax even for a large house is often quite lower than 4K, stamp duty starts at 125K and between that and 250K it’s just 2%. So with the exception of London and a few other cities in not sure it’s what is preventing retired people form buying newer builds, the fact that the new build is likely considerably worse than the 80 year old house they live in just might be however.
The article is about single-child couples who built 400~700m² houses as their children were already adults.
Checking the numbers, Bethell is 78 so bought / built a 700m² house at 69. Their monstrosity of a house has 4m ceilings from the pictures. The Hambleton built their house at 82 and 68.
