Before Andy Burnham delivers his first Budget on Wednesday, the question of where he intends to find the money for his ambitious plans remains unanswered. But one group has been pointed to as a possible source of cash: homeowners.
Chancellor John Healey has already ruled out changing capital gains tax rules for anyone selling property. Yet the sense that those who have managed to get on the ladder, rather than those without assets, could bear more of the burden remains.
So, do homeowners pay enough tax? Housing journalist Clara Hill and homeowner Emily Watkins give their perspectives.
We ask whether homeowners pay enough tax, but perhaps we should be asking whether the UK’s millions of private renters are already paying too much.
We renters should, at least, no longer have to pay council tax. The services which council tax provides are essential ones – but council tax is just about the worst way to go about paying for them.
I am, like lots of young people, a renter. Paying rent eats up 35 per cent of my pay. Add on bills and suddenly it’s 40 per cent. High housing costs, including council tax, make renting feel inescapable. More money going out means less money in for a deposit, and more time trapped paying someone else’s mortgage. When council tax can suddenly leap from year to year – Wandsworth Council, for instance, has warned residents it will go up by 94 per cent, or £958, next year – things are even more precarious.
Abolishing renters’ obligations around council tax would help people become homeowners, and launch them out of the Wild West of the British private rental sector. On average, private renters hand over 34 per cent of their income to house themselves. Low-earners, according to Shelter, shell out 63 per cent of their income. Mortgage payments, by contrast, can amount to just 20 per cent of average earnings according to government data. But saving for one can feel impossible, particularly to those denied The Bank of Mum and Dad payouts.
And it’s not just young professionals who are renting. The latest numbers say that 10 per cent of households headed by someone 65 or older rent too, as well as 11 per cent of 55 to 64-year-olds.
Yet policy-wise, there’s very little being offered to ease renters’ lives. In July, Prime Minister Andy Burnham denied planning to axe council tax. There are, however, other ways of getting councils the money they need. We need to make the case for them.
Campaign group Fairer Share has proposed a yearly Proportional Property Tax to fund local authority services like bin collection and schools. In practice, this means a yearly bill of 0.48 per cent of the property’s value charged to the owner rather than the occupier, a radical onus shift. A property worth £300,000 means a £1,440 bill for your landlord.
There is a potential problem there, though. A 2018 report by the Resolution Foundation concluded landlords should front council tax but conceded it would, on the whole, be passed back to tenants in rent increases. Without rent controls, the same would likely happen with a different kind of property tax, leaving renters vulnerable.
We used to have such rent controls. Their scrapping in 1989 marked a vital development in Margaret Thatcher’s mission to deregulate the housing supply. Her tearing up of the post-war consensus on the socialised provision of key services like housing, transport and utilities was done, in part, to foster and enable opportune investment conditions.
Decades of privatisation, deregulation, and reduced state intervention in areas like housing has been disastrous for ordinary people. For landlords, it’s been excellent. As barrister Nick Bano outlined in his searing book Against Landlords, giving them the unfettered right to set rates has propelled property values sky-high because house prices represent the potential rent revenue. Thanks to its undisputed “need” status and publicly funded safety nets like housing benefit, housing is one of the safest financial bets going.
Council tax reform might provide a bit of relief, something to add to your deposit. But it will not be enough. Instead, let’s emphasise the truth: these things feel out of reach due to the legal and moral framework of landlordism.
To remedy this, Burnham’s Government must end landlords’ Thatcher-given right to charge whatever they want – and make them pay council tax while they are at it.