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.
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