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Jacob Rees-Mogg has co-authored a paper for the Institute of Economic Affairs titled ‘Raising the Roof – How to solve the United Kingdom’s housing crisis.’
The Paper draws on some of the entries for the second Richard Koch Breakthrough Prize to find free-market solutions to the United Kingdom’s housing crisis. The £50,000 prize is awarded to the boldest free market ideas to increase the supply of houses and the proportion of Home owners. Click here to download the full paper.
Of particular interest under solutions for the housing crisis is the authors’ conclusions on cutting and decentralising tax:
“Fiscal decentralisation is an important part of the solution. The centralisation of our property taxes deprives local government of incentives to allow building or to ensure the quality of the environment, while the structure of fiscal incentives at the national level badly distorts our housing market.
“The solutions begin at the national level itself, where seeking more home ownership does not justify attempting artificially to inflate it by creating tax burdens elsewhere, such as Capital Gains Tax (CGT) on shares that leave homes exempt. This simply increases house prices, and this distortion can be reduced by lowering CGT on shares (Wadsworth 2009).
“High Stamp Duty also harms people’s ability to move and to buy. As James Mirrlees described it, this tax ‘[defies] the most basic of economic principles by taxing transactions and produced inputs respectively’ (Beck and Booth 2019).Stamp Duty can therefore be reduced to 2010 levels, then devolved so that local governments have the capacity to reduce it further (though not to increase it back above 2010 levels). As we have seen, VAT on maintenance and restorationalso harms supply, and canbe abolished (see Meakin 2016).
“Stamp Duty is also too complex, with lower rates for self-built homes, and properties left empty or allowed to become derelict,8 creating an incentive for people to leave properties vacant. The latter harms supply and the capacity to move, while making it difficult for buyers to pay the right tax (although the first-time buyer exemption, which does help people to buy, should remain).
“Meanwhile, as Beck and Booth (ibid.) have proposed, investment in property should be treated like investment in any other business, with all business costs deducted before taxable income is determined, and with no discrimination between different vehicles for holding property.”
Could this be seen as a blueprint for housing from a free market point of view? This paper is very different from the awful anti-landlord propaganda being churned out almost everywhere else.
Jacob Rees-Mogg MP was appointed Lord President of the Council, and Leader of the House of Commons on 24 July 2019. Whilst this is not a Ministerial job with a direct responsibility for housing he is considered an influential member of Government.
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