Would you support a BIG second home tax?

No one said that; but whenever there’s mention of rebalancing the tax burden to the rich, there’s a knee jerk reaction from some quarters to protect the status quo.

It’s the strange dichotomy of our free ‘capitalist’ society where we have to defend the rich’s right to get richer, otherwise they won’t bother investing. But we shouldn’t improve the income of the poor because it makes them lazy.

But for me, the crux to the Buy to Let market is that as well as fuelling property inflation, it’s also one of Mrs Thatchers ‘socialism for the rich’ tactics. Our taxes are increasingly subsidising the lifestyles of people who have money, whilst the right can feign dismay at the amount of our tax that is paid to ‘feckless’ people in housing benefit, they’re laughing up their sleeves because they know damn well that money goes straight into the pockets of their mates the landlords.

See also working tax credits / UC subsidising the wages of employees of billionaires.

 

To be fair I know 2 people who bought property before the banking crash one who owns the home and another who bought a flat as an investment both properties still not valued at what was paid nearly 15 years ago. There is potential for the property market to dry up again next year imo House prices have rocketed since stamp duty was cut when buying slows down value will drop.

 

Where it doesn't sit right with me is over the years the governments both Labour and tory have took money out of the miners pensions and its been frowned upon and rightly so. But a self employed builder who works hard all his life gets to a certain age doesn't blow all his money has savings and thinks I need to invest these or I'm going to be doing this game at 65, puts it into property and thats frowned upon and he is seen at "the rich".

 

I dread to think what an end of term punishment would have been. Watching it twice, maybe.

 

Don't now get involved in political argumente but this is more about the economy and the state of society. I have no problem with private landlords and buy to let, EXCEPT...that private landlords are not all the same and whilst most are people who are fair and reasonable there are a proportion of individuals (and companies) who are not ... ranging from slum landlords (some of whom who are involved in criminal activities) to unscrupulous uncaring corporate landlords who only see tenants as pound signs on a ledger.

You can blame Thatcher who, in 1988 introduced the Housing Act sweeping away the 'Fair Rent Act' overnight and in doing so, opened up a' can of worms' .

I only comment on this this, because we moved to Barnsley in 1977 when my late father left his Lytham St Annes job in the Valuation office as a Civil Servant to take up a local authority job (effectively a promotion) as a Rent Officer. The role involved inspecting and valuing properties in order set fair rents on private rentals as well as ensuring they were fit for purpose. This, amongst other regulations, ensured that overpriced or badly maintained properties were weeded out of the system and unscrupulous landlords were held to account.
The new 1988 Act, swept that away and the 'laissez faire' 'market forces' mantra of Thatcher replaced it resulting in a free for all largely unregulated system we see now that allows exploitative practises to exist in certain sectors of the property rental market, most often, affecting those most vulnerable and in need of suitable accommodation.

My father had retired by then though but will be turning in his grave as he believed his job was not only worthwhile but vital having seen how some tenants were being exploited.

 

I very much agree with higher taxation to fix the broken economy we have. However the thread title asks 'would you support a BIG second home tax?'

There is already a big second home tax, landlords pay 3% stamp duty on purchase, whatever their tax bracket is on rent and capital gains tax on selling.

Simply taxing one industry and not raising taxes across the board would be markedly unfair and would cause many more issues that it would solve as pointed out already on this thread.

Obviously you have a real issue with landlords who you see as some super rich elite. But if you visit most auction rooms throughout the country you'd see that this very much isn't the case.

 

No one is frowning.
Some people are pointing out that property inflation is driving the divide between rich and poor.
People are perfectly entitled to make a profit.

But what of those profits should be funded by your taxes?

Just because someone has chosen to invest in a very stable investment vehicle to fund their retirement doesn’t mean that should be a guaranteed windfall or that it should have been tax payer subsidised.

But the current state of the market means both those things are likely true.

 

You’ve made two massive assumptions about me that are incorrect.
Well done!

 

Sorry but that’s just not how markets work. If you could generate a 5% return on a riskless investment, everyone who is investing in lower yield investments would instead invest in your riskless property in order to generate a higher return at no greater risk. The greater demand would push the price up meaning the yield would reduce so that it is more in line with the yields on “riskless” government bonds. This assumes the market is efficient.

As for selling it on for its capital value later, of course that’s factored into the calculation of the yield.

 

They must have been pretty dodgy investments, the average U.K. house price has risen 46% since pre crash.
That’s forty six percent.
In the same period, average earnings have been below inflation.
For the less well off in society, that means that whilst their income over the last 15 years has barely increased, the price of an average house has gone from barely affordable to a pipe dream.

 

Here’s a suggestion - if you want to raise additional taxes, why not abolish principal private residence relief which would mean those making profits on the sale of their home would have to pay capital gains tax. Levels the playing field between buyers and renters.

Second homes are already hit by additional stamp duty land tax and capital gains tax.

 

Trickle down economics doesn't work. After a decade of austerity where that was the underlying principle, the rich got much richer while everyone else got worse off.

 

You seem to have me mixed up with someone who supports the notion of large tax rises for second homes.
I stated in my first post that I’m not in favour, and that any simplistic government interference in the housing market generally has negative consequences.

I only chipped in about property inflation when I saw people defending the indefensible. Property price inflation at post Thatcherite levels achieves the exact opposite of the dream she sold.

Sure enough, it worked a treat for us boomers short term. But 40 years on, there are vanishingly few places left in the country where an average income can buy an average house.

Taxation is definitely not the way to fix it, but something needs to be done. It was a government who created this mess, so it’ll take a brave move by a government to fix it.

 

They could just, like build more social houses to replace the ones sold off over 40 years - this would lead to an increase in rental properties available and a fall in the rental cost leading to a fall (or stagnation) in the housing bubble. (Supply and demand).

 

Trickle down economics was never designed to work, it was a simple lie told by the right in order to support their agenda. The spoonful of sugar to help the medicine go down.

Tories have never reduced tax or spending, they just shifted the burden to the less well off and ensured more of the proceeds went to the rich.

As for austerity, any idiot can work out that if you cut the budget of courts the police and prisons, you’ll increase the burden on society, both financially and socially. Likewise cutting social care, the NHS etc etc.

We built these systems post war as an investment in the future, demolishing them in the name of cost cutting was pure folly.

Yet some people still believe that the Tories are a better bet for a stable economy, it’d be brilliant if it didn’t have such tragic consequences.

 

You've hit one of the nails on the head. It would need serious long term thought to do it and the Govt to provide the money, or allow councils to borrow the money to build their own stock...again.
One of the problems is that the Govt make planning rules to suit the housing crisis in London on the assumption that the rest of the country has exactly the same issues, and set building targets for Councils which for a variety of reasons are not achievable without allowing wholesale building on virgin green land, simply because developers don't want the hassle and (admittedly) cost of building on brownfield sites. Developers come before Planning Cttees with plans that promise to build 'x' amount of affordable housing without anyone on the Cttee knowing, or being able to ask how much the affordable properties will be, £100k might be considered affordable by some, £250k plus might be considered affordable by others...Cttee should be seeing it in a black and white contract form before making a decision in my view....likewise Section 106 payments, it's now quite common for a development to be passed based on a promise of a certain sum in mitigation of various effects, ie loss of green space or extra school or doctors facilities, what is happening now is that they get permission for the development....don't build, and come back in a year or two's time claiming the market has changed and they can't meet the contribution.

 

With the population ever growing and the demand for new houses and affordable rentals growing ever more there is always a good chance that the market will keep rising. But with many on here fearing a recession due to brexit and the pandemic next year could see house prices fall. I wouldnt be bothered about hitting the big property investors with 30+ properties in there portfolio but to go for the builder who has invested for a retirement and already paid tax on his investment doesn't sit right with me.

 

I normally dont get into politics on here but this has an economic flavour.
Imho due to the hand outs of the pandemic we kind of all knew that this would have to be paid for somehow. The national insurance rises will go somewhere towards that and for a short term (say 12 months) i dont mind. What I do mind is that the NHS app cost us £37 billion and having talking to my brother who is a project manager in IT and worked on lots of government projects....can not believe, this has not been immediately investigated and put right (ie monies put back into our economy). I guess this is getting off the original question of second homes but it is a question for our leaders on how monies can be raised.

 

It doesn't need to be paid back in any period of time. Basically, the government borrowed money from itself to fund Covid expenditure and can pay it back over any period it wants at any rate it wants. It is entirely a choice to pay it back quicker.

Imagine you have 2 bank accounts - 1 current and 1 savings, and you need to borrow money from the savings account because you have an unexpected bill. You can pay it back from your next months salary, or you can pay it back in installments over 1 year or 5. The government is like that, except (unlike you or I) it isn't planning to retire, die, divorce or get ill and can continue to make payments over hundreds of years if it chooses. The only issue is that increasing the amount of money in circulation can increase inflation, so it needs taxation to remove it from circulation and control inflation.

 

So..... i'm thinking about buying a second home...... *oops..... awkward* ;-)