Housing -- A Warning from History
Housing Expert Fred Harrison Calls for Tax Shift
| Does there exist a revenue-neutral "tax shift" that actually makes housing more plentiful and affordable? Yes, this is no mere theory, it is a proven fact. Here are some recent remarks on the subject. This article originally appeared at The Property Forum. |
Blaming the current housing crisis on the increasing number of
immigrants entering the country is a red herring, says housing
expert Fred Harrison, responding to a right-wing thinktank's controversial opinion
published this week.
The controversial group Migrationwatch had said on Tuesday that more than
a million new homes were needed on top of current plans for the
next 20 years, caused by the increasing level of immigration.
But the causes of the housing crisis run much deeper than the
reactionary hypothesis of those eager to blame someone or something.
In November 2002, Fred Harrison, Executive Director of The Centre
for Land Policy Studies, wrote a paper entitled: "Housing:
Crisis in Need of a Theory".
He sagely forecast in this document: "Europe will experience civil
conflicts over the next 20 years as migrants and economic activity
are increasingly concentrated in the golden triangle (London-Paris-Frankfurt).
"Scapegoats abound. Migrants will become targets for the frustrations
of indigenous populations."
At least as far back as the 1960s, Labour and Conservative Governments
have failed to put in place the market arrangements whereby construction
could keep pace with need, believes Mr Harrison.
"The result is boom and bust in the housing market. This causes
chaos that takes prices beyond affordable levels of so many people,
whether they are immigrants or not. The immigration aspect is
a pure red herring.
"Even if we didn't have a single immigrant into Britain, we would
have the same level of crisis and dissatisfaction. The right-wing
would then have to look for alternative scapegoats."
Mr Harrison considers that government housing strategy has always
been self-defeating and it is this vicious circle that causes
the system periodically to implode.
Migrationwatch chairman Sir Andrew Green said that Ministers are
"sleepwalking into a massive housing crisis", and Mr Harrison
agrees - but not for the same reasons.
Housebuilding is not keeping up with the demand. The ODPM revealed
in April 2003 that the number of private homes built last year
barely changed from the previous year's 77-year low.
John Prescott blames builders, accusing them of building high-value
detached houses on expensive land at low densities. In turn, builders
blame the planners, claiming that permission to build is not forthcoming
at a speed that matches demand. And NIMBY (Not in My Back Yard)
activists do not want their communities 'blighted' by development.
Consequently, Mr Harrison believes the Sustainable Communities
plan is flawed, and unless Government incorporates a national
land tax strategy, their housing promises will not deliver.
However a land tax set to be introduced in the autumn will fill
the Chancellor's coffers, and it has the potential to have a positive
effect on housing development.
Studies show that the arrival of a new London Tube line in 1999
sparked localised property booms, from which the Government and
local authorities gained nothing.
If they gained from localised land and property price increases
through a land tax system, as Mayor Ken Livingston outlined in
his London Plan, it could help launch the building of a new wave
of rail, tram and other infrastructure.
When infrastructure and developments increase land values of an
area, government can use the tax revenue to invest in public services.
But for a land tax to have a deeper impact, Mr Harrison considers
that income taxes must be cut as well.
"We know that by building schools and hospitals in these areas
where we're providing affordable homes, land values will increase,
which by itself will push affordable houses beyond the affordability
of many people still.
"That's the ridiculous aspect of the current arrangement. But
instead of just raising additional revenue from land tax, income
tax should also be cut, and then you have a virtuous strategy
for balancing need."
With more housing and less tax, the populous will have more disposable
income with which to purchase property.
"It's so important that this time they don't make the same mistakes
of the past," said Mr Harrison.
"We will end up with the same contradiction that we've had with
previous governments, like George Brown's [minister for economic
affairs 1964-66, and deputy leader until 1970] policies on the
1960s.
"In the 60's they introduced land taxes of sorts, and they actually
worsened the supply of affordable housing.
"This time, unless they correctly frame the capture of land values,
Prescott, in ten years time, will have to admit -- like they are
doing now with transport -- that they got it wrong."
---------------------------------
Fred Harrison runs the Centre for Land Policy Studies. Harrison's newest book "Boom/Bust: Housing and the Business Cycle (1776-2010)" is due to published Autumn 2003.
| For more on housing in the United Kingdom, see this article. For more on affordable housing in general, see this speech by Al Hartheimer and this editorial on Gentrification by Fred Foldvary. |
| Email this article | Sign up for free Progress Report updates via email |
What's your opinion? Tell your views to The Progress Report:
| Page One | Page Two | Archive |
| Discussion Room | Letters | What's Geoism? |
