Charging Capital Gains Tax on homes would be a significant improvement on the current stamp duty regime, argues the National Institute of Economic & Social Research’s Dr Angus Armstrong in a thorough analysis of the economics of the UK housing market.
Housing is at the top of our political agenda. This is appropriate given that housing is a necessity as it is essential for the security and well-being of our families. Article 25 (1) of the United Nations Declaration of Human Rights recognises housing as part of citizens’ right to a “standard of living adequate for the health and well-being of himself and his family.”
There is mounting evidence that we are failing to deliver decent housing, especially for the younger generation. First, more and more houses are being bought for investment purposes which raises the cost of housing. Second, older generations appear to be “under occupying” and even hoarding houses while younger generations are struggling to move into homes. Third, the number of new homes continues to fall below the number of new families. Fourth, the re-reclassification of housing associations may leave this essential source of housing for lower income families less able to access long-term stable funding.
This Commentary looks at the problems in the UK housing market and considers fundamental reforms to housing taxation and housing finance.
Dr Angus Armstrong is Director of Macroeconomics, at the National Institute of Economic & Social Research. He was previously Chief Economist Asia and Managing Director at Deutsche Bank, and was Head of Macroeconomic Analysis at HM Treasury from 2004 to 2011.
This commentary is based on a written submission to the House of Lords Economic Affairs Committee for their inquiry into ‘the economics of the UK housing market’.