Home owners must pay more tax, says Blairite think-tank

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Home owners should pay higher taxes to reduce inequalities in the housing market, a Blairite think-tank says.

The Institute of Public Policy Research also calls for a 10-year programme to build 250,000 houses a year in the South of England, in its report published today.

Chris Holmes, a former director of the housing charity Shelter, proposes higher rates of council tax on expensive properties, abolishing council tax relief on second homes and increasing stamp duty to quell house price inflation. His report also advocates lowering the threshold at which inheritance tax is levied and floats the idea of imposing special council tax rates in areas with severe housing shortages.

But the Conservatives seized on the report, arguing that its proposals would hit families and first-time buyers.

Mr Holmes says housing has become the "most extreme form of social inequality in Britain" and calls for radical reform to reduce inequalities. He calls on local authorities to overhaul their housing policies to give their tenants more choice over where they live, even allowing councils to buy properties hundreds of miles away to free inner-city housing.

Gordon Brown, the Chancellor, has already moved to increase stamp duty on more expensive homes in an attempt to calm house price inflation, while local authorities have set targets for social housing in new developments.

Mr Holmes accuses successive governments of bowing to "nimbyism" by failing to promote new housing developments. His report says the right to buy council houses has led to a sharp reduction in good-quality and desirable homes available for families on low incomes.

He warns: "The growth in inequality has been caused by a succession of different policies: the replacement of older homes by high-density flats; the imbalance of suburban growth, dominated by housing for sale; the resistance to building low-cost housing, so poorer people could move from overcrowded flats in inner cities; the regressive tax relief enjoyed by home owners; the loss of good-quality homes through the right to buy; and inadequate public investment in affordable social rented housing."

Mr Holmes's report says the value of private homes has increased from £36bn in 1970 to £1,525bn in 2001. It says there arenow only 10 districts in southern England where someone on an income of £25,000 can afford to buy even the cheapest home, while the number of homeless families in temporary accommodation has increased from 5,000 to 80,000 since 1980.

Someone earning £25,000 a year could afford a home in any district in the North of England, the report says.

David Davis, the shadow Deputy Prime Minister, said: "Yet again, Tony Blair's favourite think-tank is flying kites for Labour. After the increases in stamp duty and council tax this will be another example of New Labour hitting first-time buyers and young families hard. The prohibitive cost of buying a home under this Government is disgraceful considering they pledged to actually make it easier to buy a home."