Could radical tax reform solve housing problems?

New report urges political bravery required to make a difference to millions of families

House price inflation needs to be halted by a revaluation of tax bands to reflect actual house prices, according to the Joseph Rowntree Foundation.

The social policy research charity argues that revaluing Council Tax would also make the system fairer as currently people in cheaper houses pay a higher proportion of Council Tax than people living in expensive ones.

Their estimates suggest 3.7 million households are worse off as a result of the failure to revalue Council Tax because households would have moved down bands. The charity says that over time, these changes would ease the transition to a National Property Tax, which could play a key role in stabilising the market and ending boom and bust cycles.

The JRF proposes various additional measures including:

* an insurance partnership scheme in which borrowers, lenders and the Government make a contribution to a pooled fund to provide a safety net for homeowners struggling with mortgage costs

* increasing the availability of social rented homes and reforming the private rented sector to give renters more security

* additional investment in meeting housing supply needs

Kathleen Kelly, Programme Manager for Place at JRF, said: "Attempts to build thousands more homes are welcome and badly needed to overcome the high prices that lock so many out of ownership.  But they won’t come quick enough for those who are struggling today. We need radical tax reform that would reduce volatility and offer a better deal to millions of households, while developing alternatives to ownership so people have access to secure tenancies in both the social and private rented sector.”

Mark Stephens, co-author of the report, said: “Overall, the steps taken by the Government fall far short of the fundamental overhaul we desperately need to create a stable housing market. Tackling issues such as property taxation require political bravery and there is an important longer-term prize at stake, a more stable system that has a greater social benefit than the four boom and bust cycles we have experienced since the 1970s. But in some ways this progress report shows we are moving further away from a stable housing market.”

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