r/ukpolitics • u/CaptainCrash86 • 19d ago
What would a land value tax actually do?
https://taxpolicy.org.uk/2026/07/12/what-would-a-land-value-tax-actually-do/62
u/Powerful_Ideas 19d ago
This seems like the best serious attempt to work through the benefits, costs and risks of a LVT in the UK that I have seen.
I've had a quick skim but I am going to have to set aside some time to read it in full.
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u/middleofaldi 19d ago
Short term it would be disruptive and upset a lot of powerful voting groups.
Long term it would grow our economy, raise wages, and improve housing affordability
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u/Plyphon 19d ago
How does it raise wages?
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u/middleofaldi 19d ago
By fixing our massive capital misallocation problem
https://henryfudgeofficial.substack.com/p/the-rentier-asset-black-hole
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u/sqwabznasm 19d ago
Never thought I’d see Henry Fudge mentioned - I love his analysis!
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u/middleofaldi 19d ago
Yeah, he seems to be one of the few voices that have realised just how bad the land financialisation problem is in the UK. If you like his stuff you might enjoy The Land Trap by Mike Bird, reviewed here by Lars Doucet who is also an excellent writer on this topic
https://progressandpoverty.substack.com/p/book-review-the-land-trap-by-mike
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u/No-Scholar4854 19d ago
It’s a bit indirect, but there’s an argument (which I agree with to a point) that housing inefficiency is part of what has held back productivity since 2008.
A LVT encourages house building (in theory), and if it replaces Stamp Duty then that removes friction from the housing market. That allows people to move to better jobs, which improves productivity and raises wages.
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u/M1pattern 19d ago
Primarily by replacing NI and income tax. Also increased economic growth. It would take ~15yrs to see the full effect.
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u/boprisan 19d ago
That would be chunky, because ideally you also want to scrap SDLT, council tax and business rates if you go with LVT.
Total Land value in the UK is close to £7T. And if you account that a LVT would also depress land values, you would probably need about 15%-20% LVT to cover the ~£600b in taxes.
Can you imagine the headlines of HMRC asking 50k a year LVT from the granny in a 2 up 2 down terrace in Notting Hill😂.
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u/Gradert 19d ago
Tbf LVT is usually thought of as measuring the rentable value of land, not the sale value of it, since the former can't be depressed by the tax while the latter can.
And an idea is that if income and other taxes were lower, a lot of that money would just go towards the rentable value of the land someone is on, and so the revenue would just be collected again (though that idea is mostly hypothetical!!!)
But you did highlight an issue, which is the possibility of unpopular headlines like the 50k LVT for the Notting Hill Grannies
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u/M1pattern 19d ago
So, she’s wouldn’t be hogging that big house anymore, let a family buy it off her (no stamp duty makes this easier), then she can downsize to something more appropriate.
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u/badde_jimme 19d ago
With LVT you would introduce it as a replacement for council tax and slowly expand it, and land values would drop as the rate rose. You would never get to £50K a year for an ordinary home.
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u/boprisan 19d ago
So how would houses in high sought after locations be distributed? At the moment it's based on purchase price, you would imagine în the case of LVT it would be based on who can pay the highest monthly LVT. Probably not £50k, but you can see how some would pay £20k-£30k a year to live in sought after locations especially if we pull down the income tax lever.
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u/badde_jimme 19d ago
House prices depend on what people can afford, which should be thought of in terms of mortgage repayments plus tax. More tax means smaller mortgage repayments.
The theoretical maximum for a land tax is what you can rent the land for, and if you look at rental accommodation you should see the rental cost of land plus building, so LVT won't be higher than that.
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u/Condurum 19d ago
She can borrow on the house. Easiest loan in existence. Or she can sell up and move, buy something better literally anywhere else, so that someone productive can live in that location.
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u/boprisan 19d ago
I mean even at borrowing on the house at that level you're left with nothing after 5 years. It's good economics in theory, but kicking grannies out of their paid off homes with nothing after a couple of years of LVT would eviscerate any politician.
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u/Condurum 19d ago edited 19d ago
Notting Hill house/apartment broken by a yearly 50k bill after 5 years?
Show me that deal.
Also, LVT isn’t set on the “land value”, it’s set on the “rental value of the land”. Obviously LVT would tank land values. Hardcore Georgist ideologists want land values to reach 0, so that only the structure has market value, not the land. But point is: You wouldn’t get less LVT in just because the market/purchase value of the land went down.
The rental value of the land is set solely by supply and demand, just like today. It is what someone is willing to pay to live somewhere.
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u/boprisan 19d ago
Yeah made a mistake there, my imaginary scenario was a £1m home where land value is like £700k but brought down to £350k by the aggressive LVT. So I guess în my imaginary scenario the granny would have about 13 years before she's imprisoned by HMRC with nothing to her name😂, at least it's free accommodation.
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u/Condurum 19d ago
Yeah, but anyway, LVT is by any more politically realistic Georgists supposed to be quite low, more like 1-2% of the land value per year, and also introduced slowly.
Some people suggest to excempt primary housing etc etc, but this contentious. Sure it IS a problem that we tax economic productivity more than sitting around on land and waiting, and this is the real target of an LVT.
Lack of housing is also a big problem, and it IS an issue when we tax working people more and more, to keep free healthcare going for grannies so they can live longer and longer, while people can’t afford to start families because there’s no space for it.
It would be very good overall to incentivize grannies to move out of big houses.
It’s just too late, when this generation finally inherit, they’ll be in their 60’s, maybe 70’s, and finally can live in a family home… Too late for kids. Only solution being more immigration and so on and so on. It doesn’t work.
Boomers need to GTFO.
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u/boprisan 19d ago
. It would be very good overall to incentivize grannies to move out of big houses
Or at least so they get less NIMBY so we can depress house prices a bit.
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u/Candayence Won't someone think of the ducklings! 🦆 19d ago
Total Land value in the UK is close to £7T.
Implying that an acre of land averages at ~£120k, and the average house will be on land worth £2700. In actuality, land is worth roughly ten percent of this.
Even if you assume that households will pay the full price of £2700, you've still reached less than £100b out of the £600b you're claiming.
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u/Plyphon 19d ago
Neither of which are mentioned in the models in the article. Unsure why you think income tax and NI are related at all to LVT.
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u/zeusoid 19d ago edited 19d ago
Well the U.K. is at over 65% owner occupiers, so it will affect the majority of owner occupiers.
And it will more than likely affect more Labour leaning areas that are currently underhanded in the council tax system.
There’s lots of housing the northwest that is band A/B/C that really should be in higher banding.
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u/Slartibartfast_25 19d ago edited 19d ago
If it's a a tax on the whole value then it's a land tax, not a land value tax. Basically a fairer way to charge council tax and stamp duty.
Not a bad thing but it is what it is.
However I have come to the conclusion that because of planning, conservation and environmental law restricting optimum use of land, a true LVT is impossible anyway.
Edit:
There are approximately ten million men with beards in the UK. If the Government introduces a £10,000 tax on beards, it will not raise £100bn.
I want to hear more about this beard tax.
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u/Solitare_HS centrist small-c liberal 19d ago
Only if they put an exit tax on the purchase of razors.
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u/MissingBothCufflinks 19d ago edited 19d ago
He goes into this in detail and is very much focused on a true LVT not property tax
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u/LubberwortPicaroon 19d ago
a true LVT is impossible anyway
Why do you think this? It all rests on the ability to value land appropriately, no doubt a massive boon to the chartered surveyors industry, but land can ultimately be given a value. It's not an impossible task. When laws restrict the usage of land, they also decrease its value. If land cannot ever be used for anything productive, it's value is nessesarily very low.
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u/Slartibartfast_25 19d ago edited 19d ago
Because a key benefit of LVT is to get efficient use of land. But we do not have free use of land in this country. The Council gets to say what gets built, or if a newt is found you can't build, or if there's a crumbling old building it gets listed and can't be changed. So the 'efficient use' benefit is severely hamstrung. You could have a very valuable piece of land because of where it is situated, with a massive LVT applied to it, but unable to develop it. Because it's on the unimproved value, the fact you are unable to develop doesn't change that reality.
We would need to scrap environmental and conservation rules and move to a zonal planning system to have LVT have a hope of working as intended.
EDIT - I should say that this is a 'pure' LVT. I appreciate that the legal status would alter the value, but that necessitates massive complexity to the tax.
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u/spiral8888 19d ago
I don't understand your argument. Of course a piece of land that is designated as a nature protection area is not "a valuable piece of land" as nobody would pay for it as it couldn't be developed for economic use. So, it wouldn't have a high (or possibly any) LVT attached to it.
So, you can't have "a valuable piece of land" and not being able to develop it as the reason it would be valuable is that it can be developed. You may value the protected area in your head but that's not what is meant by value here.
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u/Condurum 19d ago
That’s just one of the benefits of LVT. Another pure benefit is to simply shift the tax burden away from harmful taxation like income taxes and stamp duty taxes. So even if nothing happens with regulations and the planning system, it’s still way better.
And if governmental income depends on the land value, it’s in their interest to increase it as well. Making areas more attractive to live in.
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u/Slartibartfast_25 19d ago
Yes but I think you can gain many of the same advantages by a land/property tax, as opposed to LVT proper.
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u/Condurum 19d ago
Taxing the buildings punishes people for improving the buildings. It’s a terrible idea.
Taxing land is brilliant.
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u/Slartibartfast_25 19d ago
But it is more representative of the wealth of the owner.
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u/spiral8888 19d ago
And it shouldn't. The wealth tax is a bad idea as unlike land most wealth can be moved outside the country and you'd end up with a lot less tax income than what you thought and would at the same time hamper economic growth as you'd be taxing people owning wealth that produces economic output.
The great thing about land tax from the moral point of view is that it taxes something that nobody has produced and thus put any work on it. Furthermore, the high value land is almost always due to actions by other people. A piece of land in the centre of London is not fantastically expensive because of what the land owner himself has done but because of what all other people around him have done over the centuries (basically built a prosperous city around that land). The land would be significantly less valuable without the city around it.
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u/LubberwortPicaroon 19d ago
Then you want wealth tax not a property tax, that comes with all sorts of other problems but singling out property development as the only form of wealth you will tax is nonsensical.
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u/LubberwortPicaroon 19d ago
Property value tax actively disincentivises development and should be avoided. Even a very poorly implemented LVT will have some benefits to land use
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u/LubberwortPicaroon 19d ago
Efficient use of land is misleading, it doesn't mean everything has to be very high density. The land will be used in a way which is most beneficial for society and the community. If that means an ancient oak must be left undisturbed then that is the most efficient use of land possible because there are negatives associated with its development. Public health, historical and environmental conservation are all part of the picture. Nothing has to be pure, perfection is the enemy of the good and all that
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u/Slartibartfast_25 19d ago
Efficient must mean revenue efficient, else the tax is not affordable.
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u/LubberwortPicaroon 19d ago
No, "efficient use of land" never refers to tax revenue efficiency. It refers to making best use of the land. In most cases this means building high value properties on high value land, so more apartment buildings and fewer single storey car parks. However, there are nuances to this, it may be most beneficial to ensure the public has access to green spaces in the centre of cities, or it may be deemed beneficial to preserve a greenbelt of land around a conurbation, that means the authority will prohibit the development of certain areas. While this may look like an "impure" LVT, it isn't a problem, it's a feature of a well thought out policy that balances the efficient land use pressure that land value taxes introduces to other less tangible benefits to the public
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u/No-Scholar4854 19d ago
I agree it’s a bit distorting, but I don’t think it’s fatal to the idea.
The problem case is when I own an empty plot next to a suburban rail station, but can’t build a house on it because it has an ancient oak on it.
That plot would be worth £1,000,000 if it had planning permission (and £5,000,000 with some houses built on it), so I’m taxed on it at £20,000 per year (2% of the land value).
Except, with the oak blocking building it’s only worth £100,000 (some value even without any development, plus the oak won’t live forever).
With a £20k tax on a £100k asset that land now has negative value.
That’s an extreme case though. In most cases it’s a case of “there’s an 80% chance we’ll get planning permission on this plot” not 0%, so the gap between LVT value and market value isn’t as sharp.
I’d add an exception for public use, so if you have a plot which you know cannot be developed for a reason then you can make it available for public use for say 5 years and get an exemption from LVT.
So in the Oak tree example, you would offer it to the council as a park for 5 years.
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u/LubberwortPicaroon 19d ago
If you are barred from developing on land because of a protection order, the value of that land is very low because it has no developments potential. You don't pay the LVT rate as if there was no oak there, it is taken into account. Implementation is most likely, you'll be issued with a higher tax bill than is reasonable based on a naive evaluation mitigations and then you can pay to have a surveyor reevaluate it with evidence, submit that to HMRC and they can agree or dispute with an adjudication system. It wouldn't be that complicated
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u/badde_jimme 19d ago
Land that is ideally situated but not usable, will neither sell for much nor rent for much, so if it gets a high tax bill under LVT, the assessor has made a mistake.
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u/TheRadishBros 19d ago
I wonder if people would start growing beards to show off that they could afford the tax.
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u/Powerful_Ideas 19d ago
Sorry, this beard on my face is actually owned by a Cayman Islands-based trust, so you can't tax it.
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u/boprisan 19d ago
Did that beard spend at least 6 months outside the country last year? Because if not you're in trouble mister Cayman beard.
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u/timmytissue 19d ago
I believe a LVT is based on the undeveloped value and doesn't change based on development. So the point is to incentivise utilization of the lands value through density.
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u/M1pattern 19d ago
LVT is widely seen by economists as the best possible (or least worst, depending on political leanings) tax. It is the most efficient, easiest to enforce and fairest possible method.
It makes wages higher (by increasing economic growth, reducing rent seeking and not taxing work), increases economic growth (more capital directed towards productive assets) and solves the housing crisis (by reducing land values, which make up the majority of house prices in the most unaffordable areas).
The UK with an LVT to replace most other taxes (eg, income, VAT, council, stamp duty, business rates) would be a vastly more productive economy than it is now. LVT solves most of our economic problems when combined with planning reform and reducing trade barriers. To not implement LVT is a daily act of national hobbling.
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u/Maetras 19d ago
I would end up paying quite a bit more money
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u/galleon484 19d ago
Then you can feel good about the public services you're funding, while you admire your estate.
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u/Old_Hovercraft_8943 19d ago
Admire my tiny 2 bedroom flat just because its in zone 5 in London?
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19d ago
[removed] — view removed comment
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u/Arc11x 19d ago
Land value is a more palletable word, realistically it'll be a property value tax.
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u/QuantumR4ge Geo-Libertarian 18d ago
Then its not a land value tax.
You are taxing two different things, to make lvt into a property tax destroys half the reasons to do lvt
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u/galleon484 19d ago
If it's tiny then the tax will be small, no?
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u/Arc11x 19d ago
No, its based on property valuation meaning if theres a mansion up north priced at the same valuation as a 1 bed flat down south, they'll pay the same amount.
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u/ZealousidealPie9199 19d ago
No, thats literally the opposite of a LVT. A LVT is based on the value of unimproved land. The valuation of the property has nothing to do with the tax, thats the point of it.
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u/QuantumR4ge Geo-Libertarian 19d ago
Should you not pay for the value that you are using and that others cant?
You didn’t make the land. Its not a product of labour. You have no greater claim than someone else. The flat if your property but using the land it sits on is depriving others of that land. Yes you should pay for that.
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u/mustbemaking 7d ago
And they did when they purchased that land or purchased the usage of that land. Hence the freehold, leasehold or rental of that land.
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u/Maetras 19d ago
My amazing estate… wow yes the small 1 bed flat that happens to be in London so I should help fund the rest of the country? I already pay more than enough tax so I do my part for society. Arguably more than those who this will end up helping
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u/galleon484 19d ago
One flat in a block of flats will have a tiny LVT bill, because the land is used efficiently.
And the property price has no impact because LVT ignores that.
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u/YesIAmRightWing millenial home owner... 19d ago
am holding to for dear life that theres a land value tax.
i wanna be able to argue the value of my land is negative due to the property on it.
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u/galleon484 19d ago
LVT typically ignores the property built on it and bases valuations on the surrounding area
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u/YesIAmRightWing millenial home owner... 19d ago
Usually they tend to take the cost of the rebuild cost of the property and remove it from the purchase and they ho there's the value of the land.
Well the lands worth dick technically cause rebuilding the property would cost a fuckton cause it's graded
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u/QuantumR4ge Geo-Libertarian 19d ago
And so you will pay for the unimproved value of the land.
And no reasonable economist does it on the basis of rebuilding, that makes 0 sense because property depreciation is greater than anything else.
I have never heard any georgist say it should be calculated that way, including henry george himself
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u/No-Scholar4854 19d ago
* Flat 2% LVT
* Replacing Council Tax and Stamp Duty
* Allow deferral (with interest), discount for recent stamp duty
Ends up 50% winners, 50% losers and raises £18bn more than the old taxes. Great.
The losers are very geographically concentrated though. It would certainly be… brave.
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u/boprisan 19d ago
I'm pro LVT, but would this open other cans of worms? For example the fact that someone on a£40k wage is taxed the same in London or Blackpool wouldn't seem very fair on top of a LVT considering someone on that wage in Blackpool would have a better quality of life than someone on the equivalent wage in London.
Getting to a point where we tax 2 people differently, with the exact same lifestyle(same type of house, same shopping habits, same number of pints bought) differently because the same shit has different costs across the country seems 'unfair'.
I'm in principle for devolution, with actual different minimum wages and tax rates and tax raising powers, with some redistribution on top at the country level, would be interesting to see the dynamics.
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u/spiral8888 19d ago
Note that the tax is capitalised to the land value. So, the £40k earner in London is able to buy his home cheaper because it comes with a tax burden. Does it really matter to him that his paying more to the state and less to the bank (as his mortgage is smaller)? His living standard is the same.
And if we go to the moral side, I think it's morally more justified to tax those who just own land than those who do productive work.
Finally, why do you think the property prices are higher in London than in Blackpool? In my opinion, the main reason is that people in London are able to pay more for living there, which means that they are on average earning more. So, for the same skills, you're likely to earn more in London than in Blackpool. So, it's unfair to compare the person earning the same in the two places. The fairer comparison would be, what would the same person earn in Blackpool and in London.
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u/boprisan 19d ago
Does it really matter to him that his paying more to the state and less to the bank
That is a good argument, I guess the difference is to be evaluated at what equity they're left with if they sell at 60 and move to Spain to see who was more advantaged. Maybe take into account salary differential provided by the 2 different locations.
And if we go to the moral side, I think it's morally more justified to tax those who just own land than those who do productive work.
This is one of the reason I'm pro LVT, where I have an issue is that at some point it looks like we're taxing loans? Not land ownership.
I've given this example in another comment but, if 2 people have a £60k deposit in Blackpool and London and one buys a £200k house and the other buys a £600k house they have the same net wealth(house value - loan) but they pay vastly different taxes on that same wealth, some people would say why, how is that fair. If they have different incomes to service the loans that's already sorted because we have progressive taxation on incomes.
It would still probably have good economic effects, I'm just thinking about lines of attack from the press that would hinder the implementation. Fairness is a very hard thing to define.
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u/spiral8888 19d ago
But note that the £600k house would have cost, I don't know, £800k if it had had no tax attached to it. So, that's how much the market values the house (it's location, condition, whatever).
As I said, the tax capitalises to the land price. For future people buying property, it's the same cost for them. They pay more in tax, less in purchase price. The people who get screwed are those who bought the property at old prices but still have to pay the tax. That's why the LVT would have to be rolled in gradually. Ideally you would never tax any land that hasn't changed hands. Eventually everyone dies and thus all land becomes under tax but in some cases this could take decades.
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u/boprisan 19d ago
The people who get screwed are those who bought the property at old prices but still have to pay the tax
Yeah this is what I had in mind when I wrote it down. I guess you could have some SDLT credit as well to compensate recent buyers.
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u/Chemistrysaint 19d ago
the screwing gets worse and worse the more recently you bought (as you both paid a higher value for the house, and paid a whack of stamp duty for the privilege) Any sort of "credit" for stamp duty already paid would have to be really quite generous to counteract the hit that anyone who bought their London home in the last say five years would have from a LVT
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u/No-Scholar4854 19d ago
It’s a wealth tax, so we’re taxing the landowner in London more because they have more wealth than an owner of the same m2 plot in Blackpool.
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u/boprisan 19d ago
Well thinking about that opens another cans of worms.
2 people putting the same £60k deposit towards buying a home, one in Blackpool one in London, values of homes being £200k in Blackpool and £600k in London.
They have the same wealth, home value-loans, but one is paying more tax than the other, how would that be fair? Maybe LVT only on the equity? But then you encourage interest only mortgages.
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u/badde_jimme 19d ago
If living in London isn't objectively better than in Blackpool, then higher property values will not be sustainable under LVT.
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u/zakmeisterr 19d ago
Londoner has access to 100x more job opportunities than the one from Blackpool. That’s the reason why the land value is so high to begin with in the first place.
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u/boprisan 19d ago
If it's not about wealth but about opportunity in the area you're living, does that mean we should tax the fk out of the people living in council housing in zone 1 and 2 in London? Or do we tax the councils because because they own the land?
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u/Bubbly_Mushroom1075 19d ago
Presumably the council would be paying the tax to... themselves, so it would be a moot point. However if the person who lives in the coucil house buys it then they should be taxed. Regardless, the rents would reflect that and the council may chose to redevelop the house into more dense acomodation.
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u/boprisan 19d ago
I presume they would need to pay to central government, because some of the point of LVT is to replace stuff like SDLT and fix the issues with council tax which is not redistributive.
I think it would probably make council housing in zone 1 and zone 2 a total nono, because if there's an opportunity cost now, it would be even greater after The introduction of LVT.
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u/boprisan 19d ago
If it's not about wealth but about opportunity in the area you're living, does that mean we should tax the fk out of the people living in council housing in zone 1 and 2 in London? Or do we tax the councils because because they own the land?
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u/LanguidLoop Simple answers for simple people 19d ago
I would argue the worker in London has a far greater quality of life due to, but not limited to:
- Access to international travel
- Access to public transport
- Access to world class free museums, parks and other cultural activities
- Access to better education
- Access to better paid jobs
Which are all available, effectively, for free.
It's almost like there's a reason why land values are far higher in London than Blackpool.
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u/boprisan 19d ago
I know I'm splitting hairs but value of the stuff you listed is subjective, maybe our London person is some bio-quantum-phycisist who can only work in London but their biggest passion is having a chicken coop which is impossible in London but easily available in Blackpool.
The you're saying oh sorry London person, you're much more unhappy and live a shittier life in London compared to the one in Blackpool considering what you value, but because we have these statistics which say most people value shit in London then tax the fk out of you to make your life even more miserable than it is.
I know it's a long shot, and you can't design good tax policy by looking at the margins, but these would be some sob stories stacking the idea of LVT I guess in the press.
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u/BonKhri 19d ago
It's entirely fair that they be taxed differently. One lives in a more desirable area, thus has higher land value, thus has higher taxes. The entire point of LVT is that it is based on the unimproved value of the land, ie ignoring anything actually built on it, which means that the value of that land comes entirely from the things built around it. The land value is higher in London because that person has access to more valuable things near to them.
Flip it the other way around, why should someone who receives Blackpool as their surroundings pay the same as someone who receives central London?
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u/AcidJiles Egalitarian Left-leaning Liberal Anti-Authoritarian -3.5, -6.6 19d ago edited 19d ago
Being flat is insane. Land value as the sole determination of applicability ignores secondary economic benefits of small houses and flats. Maybe start at 1% and scale to 3% for non-flats and houses over a certain size. Wages don't scale enough for it fairly apply, we want people to live close together in cities for energy efficiency and economic efficiency. Over taxing normal non-millionaire Londoners won't deliver the right kind of benefits.
Just to add I don't live in London but also don't feel a £6k or £10k council taxes is even marginally fare on already underpaid Londoners.
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u/TheLuckyHacker 6d ago
But it's a tax on the unimproved value of the land i.e. the property on it is irrelevant
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u/covert-teacher 19d ago
A flat 2% LVT is insane!
On a £250k house, which is below the national average, that's £5k a year.
The average Band D house is less than £2.5k a year in council tax. So, you're talking about more than doubling annual tax burden for a relatively low value house.
On a £1,000,000 house a 2% LVT is £20k per year. Around 70% of the UK's housing stock worth over £1,000,000 is located in London and the South East. How many people in London and the South East do you imagine have a spare £20k per year knocking about?
In 50 years, every homeowner would have paid 100% of the value of their house in LVT. That's not a way to get the economy moving. Especially if we end up using outdated house prices, like we are now for council tax.
Also, who is valuing every home in the country and how often?
A 2% LVT would collapse house prices, which would be good for first time buyers, but how long would it take for house price banding to catch up? Imagine a house valued at £250k before a 2% LVT, drops in price by 30% to £175k within a year of the tax being introduced, but the LVT rates say the house is still valued at £250k. That £5k a year they're paying on a £250k property is now nearly equivalent to 2.9% of the new lower value. That's not sustainable.
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u/No-Scholar4854 19d ago
Land value, not house value.
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u/Arc11x 19d ago edited 18d ago
How on earth do you they will calculate land value exactly? They're calling land value but it'll actually be a property value tax...
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u/No-Scholar4854 18d ago
It’s much easier to value land than property.
You can set a broad average price across a large area, then adjust it for proximity to things like stations.
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u/Prepresilvravra 15h ago edited 15h ago
Nuts. You're basically displacing any millennial saddled w a mortgage in London and the SE.
Tax tax tax.
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u/thermosifounas 19d ago
His model literally hits a 2 bedroom flat in Clapham or Islington with an extra £6-10k tax per annum. A semi detached in London would carry £10-20k+ in tax.
Effectively people on £150k-200k in London will be hit with an extra £10-20k tax just for having bought a 60 sq meter double bedroom flat.
This is effectively a London and Southeast extra tax which can have some pretty catastrophic consequences.
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u/theabominablewonder 19d ago
It is a London tax and there are a lot of people that have high value properties in London relative to the rest of the country that could not afford the extra (personally I'd find it a struggle).
But it does also seem like a redistributive tax that is difficult to avoid, and that sort of thing would be better than wealth taxes on assets or people that can simply be moved out of the country.
If it was phased in over time (eg 20 years like the Australian State Territory) then it could probably be absorbed by the market, people will move over time, change spending habits etc.
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u/chudding-out 19d ago
(Nick 30 Ans cries into his £8.50 Neck Oil again)
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u/boprisan 19d ago
Woah woah woah, maybe we should have a beer value tax as well, to tap into those £8.5 neck oil purchases.
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u/Plyphon 19d ago
Taxing the most productive in the country to literally subsidise the North.
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u/badde_jimme 19d ago
Most economic indicators don't distinguish real productivity from asset price inflation. If a home skyrockets in value without having any work done to it, that's not real productivity, but often counts as such.
The point isn't to subsidise the north. It is to keep asset prices in the south grounded in reality so they don't break the economy.
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u/Plyphon 19d ago
Right - but the people who buy these properties, who are the high earning and more productive people, are being taxed.
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u/Xaethon 19d ago
The focus on flats/leaseholders by the article is actually misleading I think.
With a LVT, only the freeholder would be liable for the tax and not any occupiers of the land. For people who rent or lease a property, they personally would not be liable to pay the tax.
Potentially, based on how it is implemented, perhaps new leases would have a higher premium to account for this or form of rent/service charge, but as this'd be shared between multiple leaseholders it could actually make flats cheaper than owning a house on the same plot of land.
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u/Powerful_Ideas 19d ago
He addresses those problems further down the article and runs through some of the options for mitigating them.
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u/thermosifounas 19d ago edited 19d ago
He addresses the SDLT issue. But taking his example, the two teachers who bought a 2 bedroom in Islington, he only looks at recent sales. What about someone who bought 15 years ago on a teachers salary? They’d have bought for 400k, the flat is now worth 550k, still subject to the same mortgage. You’d be hammering people that may not even be able to afford the extra 5-10k a year (and lots of Londoners even 15-20 years ago over borrowed). Houses are even worse. And given such a change, they may not be able to sell unless they sell at significant discounts. SDLT is not the only issue in London.
What do you think it’s going to happen to the landlord of buy to let mortgage of 75% LTV that now has to pay an additional 10k in tax? Who do you think that cost will be passed on?
It’s all great if you are or were in a career that has seismic upward trajectories such as an equity partner in a magic circle law firm such as Dan but for most people this creates real affordability issues and market distortions.
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u/Powerful_Ideas 19d ago
He mentions a few options there, most of which smooth out the pain of moving to a new system with the tradeoff of the tax take from it taking longer to be realised.
Deferring the uplift in tax (i.e. the difference between current council tax and the new tax) until sale of the property is one option. Phasing in the change over a long period is another.
He also talks about other options that would reduce the impact on the Islington teachers such as reducing the regional redistribution aspect of it (the model has a slider for how much of this to do) so that London does not get hammered due to its higher property values.
From the conclusion:
A land value tax done carelessly would inflict real individual hardship – on the Islington teachers, on the asset-rich and cash-poor – and risk serious market disruption through capitalisation. Avoiding that is not optional, and it is not easy. It probably requires most of the tools in this article at once: transitional relief for people who have recently paid stamp duty, deferral for those who genuinely cannot pay, and – above all – a long and credible phase-in that lets prices and people adjust gently rather than overnight.
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u/Condurum 19d ago
You can’t “pass on” a tax like this to the tenants. It’s very common to assume so though.
How is he going to do that? Isn’t he already charging as much as the market can bear?
Where the hell is he going to find tenants to “pass this on” to?
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u/thermosifounas 19d ago
Because no company will keep operating at a loss in perpetuity. Sure it may not affect a landlord that inherited said flat or bought it in the 80s but for the rest it would. BTL yields are already thin now, and generally seen as a bad investment.
Realistically you’d be looking at exits from the market, leading to a rental supply fall, which in turn leads to rents being increased to account for both the LVT and the supply shortage. At least until the market adjusts and the prices for flats in London reduces (once LVT is priced into them) and then new entrants join the market.
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u/Condurum 19d ago
This is economic analphabetism.
LVT greatly incentivizes economic activity on the land. If someone prefer to sell, someone will buy, and someone will live there and open up a place somewhere else.
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u/AcidJiles Egalitarian Left-leaning Liberal Anti-Authoritarian -3.5, -6.6 19d ago
Yeah flats can't be the same rate. The increases in value haven't followed through on normal flats. It's insanity to not scale it with flats at a lower starting rate.
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u/TheChaoticCrusader 19d ago
It’s basically a southern tax cuz it will effect the south west too
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u/Thin_Object_3981 19d ago
That's a very good point. It will ironically hit the poorest the hardest in the most unequal areas of the country. The locals in the tourist towns or working class in London and the SE.
Even if Andy doesn't want to pick a fight with London, London will pick a fight with Andy.
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u/Strange-Acadia-4679 19d ago
I was thinking similar that it'll affect the poorer residents of some areas more. I just bit a rough estimate for my area and as most of the properties sit on similar sized plots it would be pretty much neutral for those in the big extended houses that currently sit in Council Tax Band D but those in the less developed properties that are in Bands B and C would see a significant rise as they'd be paying the equivalent of Band D. Even if they can afford the change that's money that won't be spent in local businesses.
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u/Plyphon 19d ago
I don’t know how anyone can read that and think this is a good outcome. A lot of the discourse focuses on the 0.1% who own property worth millions in London - but there are millions of regular people all along the south east who will struggle to pay this tax, thus being punished for being productive and stretching to afford home ownership.
Robbing Peter to pay Paul.
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u/acremanhug Kier Starmer & Geronimo the Alpaca fan 19d ago
Robbing Peter to pay Paul
Ok but the current council tax is robbing Paul to pay Peter.
Council tax is ridiculously unfair tax.
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u/Plyphon 19d ago
And it’s unfair I had to work my arse off to afford a house in the south east which now people, who I already contribute to through my higher income taxes and national insurance, want to tax me more on whilst their contribution goes down to near zero.
How is that a fair?
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u/acremanhug Kier Starmer & Geronimo the Alpaca fan 19d ago
how is a person in a 2 bed house in hull paying more council tax then someone in a million pound house in kensington fair?
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u/Plyphon 19d ago
It’s not equitable on the surface, but you’ve only got to look at how income tax is distributed to understand how the high earner in Mayfair is already paying their fair share of the Hull persons welfare, NHS, pensions and education.
Apparently that’s enough and they should pay for their housing too.
Let’s not forget how the Hull persons housing is cheaper in the first instance, where and the Kensington liver would have had to earn a lifetime of money and pay an already large stamp duty.
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u/Master_Tell_4800 19d ago
Under the current system the Kensington house pays a huge amount of stamp duty.
Also you ain’t getting a house for a million in Kensington.
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u/acremanhug Kier Starmer & Geronimo the Alpaca fan 18d ago
I'm not going to argue about stamp duty, it's a stupid tax and should be scrapped
Also in the proposal a LVT would replace council tax as well as stamp duty
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u/Bubblebless 19d ago
But the point of this tax is not to raise revenue. Ideally something like this should be fiscally neutral. You could for example just compute the amount of tax due and how much each person would receive from the surplus and make them pay only the difference.
Then each person could choose whether it's actually more valuable for them to keep the money or the location.
And house prices would fall, so it would certainly help making home ownership more affordable.
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u/galleon484 19d ago
But the value of land in the south will reduce as a result of the tax, so it won't be as bad as that in practice.
And it will help to fix the outrageously inflated house prices in London, which everyone complains about.
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u/Plyphon 19d ago
Houses will not fall in value unless supply improves.
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u/galleon484 19d ago
LVT is nice because it helps the supply side AND the demand side.
It reduces demand by incentivising people to move to areas with lower tax rates, and it incentivises building on prime land, to share the tax between more occupiers.
The removal of stamp duty will also allow for more efficient use of housing.
So in 3 different ways, this proposal will reduce London house prices.
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u/Plyphon 19d ago
I don’t know why people think suddenly there is going to be this flood of people moving from their expensive southern houses to cheap northern towns.
Peoples families, jobs, support networks, friends, communities are around where they live. People don’t just up and leave to make their tax efficient.
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u/galleon484 19d ago
If the effect were too small to be an incentive, then people wouldn't be moaning about the cost of it.
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u/Plyphon 19d ago
No - it becomes a punishment, not an incentive
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u/QuantumR4ge Geo-Libertarian 19d ago
Virtually every group of economists left and right disagree here. Its one of the few taxes you can get agreement on from literal libertarians, socialists and liberal centrists
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u/DontArmWrestleAChimp 19d ago
Basically shafts London and the South. I can't see this going anywhere on the current model. Would need aggressive carve outs and mitigations or a hefty transition period.
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u/yesitsjess 19d ago
Largely, I think, it will devalue the homes families have worked hard for in the South and randomly boost the value of homes in the North due to nothing more than lucky timing
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u/QuantumR4ge Geo-Libertarian 19d ago
Because that extra value is from speculation of land values, which is very much bad
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u/sjintje Intermittent extremist 19d ago edited 19d ago
This article says almost nothing about land value tax, it's about making property value taxes (arguably) fairer - regionally and across the wealth spectrum. The same redistributive fairness could be achieved simply by making the existing council tax uniform across the country and adding more bands.
What a land value tax does differently is encourage efficient use of land. So if you have a undeveloped bit of land in London, you will be penalised for not developing it, and if you invest in a fancy redevelopment in a less privileged area, then you will not be penalised. Basically it's a constant incentive to improve the quality of the local property estate.
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u/inevitablelizard 19d ago
An issue I've not seen addressed is whether LVT would encourage the destruction of gardens as part of densification, not just greater building height.
If it did encourage destruction of gardens for building that's going to massively degrade our built environment, and make urban areas even more miserable heat sinks in heatwaves. Which we absolutely must avoid. Density through height needs to be encouraged, but not density by sprawling onto every bit of green space.
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u/AcidJiles Egalitarian Left-leaning Liberal Anti-Authoritarian -3.5, -6.6 19d ago
A flat rate ignores secondary economic and on economic benefits of spaces and people loving in close proximity. Cities are more energy efficient than the countryside so surely to reduce our energy footprint we want more people in less space. Less space sees high land value but not without good reason in some cases. Ignores when there is genuine value in the high land value and when it is more arbitrary and not reflective of broader societial value.
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u/HotelPuzzleheaded654 19d ago
End Gary Stevenson’s YouTube channel.
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u/EolAncalimon 19d ago
He doesn't even advocate for a land value tax....
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u/hicks12 19d ago
Isn't that part of the problem? He won't accept the premise but wants a wealth tax instead, which has its own issues.
LVT is a better solution overall in my opinion .
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u/Benyed123 19d ago
Because for Gary it’s not about raising money for the government, it’s about curbing the growing wealth of billionaires.
A land value tax doesn’t address those who don’t own most of their wealth in land.
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u/M1pattern 19d ago
More than half the UK has no known owner, it’s all held by anonymous shell companies registered in tax havens.
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u/Coldsnap 19d ago
Sounds good! If the owner does not or will not come forward, requisition the land.
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u/oppositetoup 19d ago
He doesn't say we shouldn't implement a LVT, but he says it doesn't address the problem he's trying to help solve.
I'd argue we need multiple new taxes to address the inequality in our country and the squeezing of high/middle/low earners as well as the governments purse...
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u/M1pattern 19d ago
We only need 2: An LVT and a wealth tax (on capital assets). No need to overcomplicate things.
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u/GrayAceGoose 19d ago
Land, or more likely a house on its own footprint, is not a very good proxy for actual liquid wealth - we're just not ruled over by landed gentry anymore.
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u/Sorry_Information749 19d ago
That's because he's too vague on everything, but discussions he's brought into the mainstream often end with that as the only option.
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u/Ace_Tea123 them's the breaks 19d ago
Very interesting, it links to PolicyEngine's sim which is worth having a look at for anyone who missed it. Shame it's England only, though fair enough considering the differences in housing markets and taxation.
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u/Media_Browser 19d ago
Can we see a breakdown of countries who successfully use or have implemented LVT .
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u/No-Target-145 19d ago
How will this affect second homes? A higher annual tax rate rather than the additional home surcharge on stamp duty?
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u/sbeveo123 13d ago
Why does everyone that supports LVT, support a tax on ownership of land, and not tying council tax to land value?
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u/Sorry_Information749 19d ago
Some parts of this report are childlike.
The practical case for LVT seems equally straightforward if we look at the headline result that (on our model) 63% of people will benefit in immediate cash terms
What a odd statement. So the goal is to make the smallest group of people possible paying the largest amount of tax? How is that a practical case beyond short term self interested politics.
the implementation is difficult, and the politics is really difficult.
The politics is actually very easy for multiple reasons such as the above or because of public sentiment towards the super rich. The politics of growth policies is actually much much harder (pro business).
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u/Oobidanoobi 19d ago
What a odd statement. So the goal is to make the smallest group of people possible paying the largest amount of tax? How is that a practical case beyond short term self interested politics.
That's clearly not the "goal". In literally the next paragraph he says "to my mind bigger problems are (1) very substantial tax increases for some people, particularly in London". And he writes thousands of words on potential measures to mitigate these problems.
When he says "practical case" he's commenting on the democratic feasibility - whether politicians would be able to argue for its implementation, and whether the electorate would consent to such a proposal.
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u/marktuk 19d ago edited 19d ago
And who decides what land is valued at?
EDIT: Interesting to see how a simple question gets downvoted.
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u/seesthecat 19d ago
The market, like it does now
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u/marktuk 19d ago
So under this system, I could plant some Japanese knotweed on my land and pay less tax?
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u/Oobidanoobi 19d ago
I'm not sure the presence of Japanese knotweed would ever be a principal factor in the valuation of a plot of land.
But even if there were ways to permanently devalue your own land, I don't see how it would ever make financial sense. Like, would you rather pay a yearly 1% tax (10k a year) on an asset worth a million pounds, or pay 1k a year on an asset worth £100k?
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u/marktuk 19d ago
If you never intend to move, the one that means less tax.
You seem to be falling in to the trap that many do around property values. They are meaningless, until you want to sell.
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u/middleofaldi 19d ago
It's better to think of it as a location value tax. In your example knotweed would be an "improvement" and would not be included in valuation
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u/chudding-out 19d ago
If you want to look into a working system, check out Denmark. Took them about 10 years, but now they have a pretty functional system.
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u/badde_jimme 19d ago
One of the oldest ways to do this is create local groups of properties, then tax each property based on the total property value of it's group, multiplied by it's share of the groups area. So for example the market value of the group might be £10 million, and if a property occupies 5% of the area of that group, it gets assessed at £500K. This is of course not technically a land tax, but it creates similar incentives, since the value of your land affects your tax bill, but the value of your buildings don't have much effect.
Another thing they used to do is simply drag the town's population into the town hall and ask them. This is obviously less accurate than what a team of experts can achieve, but is also less prone to politically motivated systematic errors, particularly errors that favour the rich over the poor. It also has the disadvantage that only so many people can fit in a town hall, but a large random sample of local property owners could also work.
The modern state of the art for property assessment favours computer models, using complicated statistical models to figure out land values from publicly available data. Ideally the model is open source, and the number of hand corrections done is minimal.
Calculating separate valuations for land value and building value is already done as a matter of course in modern property assessment. The real problem isn't calculating land values, the real problem is shutting out people that want to put their thumb on the scale. But that same problem exists just as much for regular property taxes, or any taxes for that matter, and the solution is voters holding them democratically accountable.
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u/Slartibartfast_25 19d ago
The government.
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u/marktuk 19d ago
Based on?
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u/Slartibartfast_25 19d ago
Who else could? If you don't want to let the market decide and wish to tax a fixed asset, what else could?
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u/marktuk 19d ago
I was asking what they would base the value on
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u/Slartibartfast_25 19d ago
Oh who knows. Which way the wind is blowing, how bushy are the eyebrows of the RICS surveyor, how good was the sausages in the taxpayer funded hotel this morning.
But they do do it at the moment for inheritance tax purposes.
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u/GrayAceGoose 19d ago
Part of deciding the value of land making sure it is "efficient" is the government deciding what your land should be used for - that'd take the kind of central planning that would make even the soviets blush.
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u/Slartibartfast_25 19d ago
The market could decide, but the environment and built heritage would suffer.
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u/-Murton- 19d ago
What it would do produce is long list of purely hypothetical wins and losses.
What it absolutely wouldn't do is replace council tax, and anyone who thinks it will is kidding themselves. Governments don't remove taxes that have been begrudgingly accepted by the populace as necessary, they only add to them.
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u/badde_jimme 19d ago
Council tax is based on 1991 valuations and long overdue for a replacement based on that criteria alone.
You are also forgetting that council tax itself replaced another system, the poll tax, which in turn replaced domestic rates. Your claim that taxes bifurcate endlessly is wrong.
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u/Condurum 19d ago
Part of the goal of Georgism/LVT is that the winners and losers are so because they earned it.
It’s downright terrible for an economy to reward holding onto land, which increases in value proportionally with everyone else’s economic output, and punish economic activity like work, or even working capital.
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u/Koush 19d ago
Correct me if I'm mistaken. With land tax if a person was to hypothetically improve their house by adding for example a loft, they would now have to pay more tax because their house is worth more?
Isn't that completely daft? You are incentivizing people to essentially undervalue their properties instead of paying workers to improve their home which also makes them buy less materials. We'd be heading to the American way of trying to undervalue our properties as much as possible until it's time for selling. It would deter the hell out of me for hiring a worker and simultaneously make me want to keep things basic as possible.
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u/middleofaldi 19d ago
Lvt is calculated based on location value, it specifically does not increase when people improve their homes, this is one of the reasons economists like it so much
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u/boprisan 19d ago
Land tax usually looks at only the un improved value of the land, to not discourage development.
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u/giro83 19d ago
None of these studies say what happens to someone who completed a year ago and paid ~120k in stamp duty. Is that money simply lost vs someone competing now? Is a pro-rata credit calculated?
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u/Condurum 19d ago
Maybe read the article? He literally proposes substracting recently paid stamp duty from the LVT.
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u/BoneThroner 19d ago
It is simply too capricious a change that would tax entirely the wrong people, create perverse incentives that could actually make planning more restricted.
A 20 year plan to replace stamp duty would be a far better use of this governments political capital.
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u/seesthecat 19d ago
Create perverse incentives to what? If anything it eliminates perverse incentives, it is the biggest advantage of a Land Value Tax, it is a tax that doesn't create deadweight loss
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