Labour’s pledge card should include a substantial expansion in social housing construction, funded by taxes on overseas owners, vacant homes and house-flipping, according the Social Market Foundation.
The Social Market Foundation – a cross-party think tank – has set out a proposal for tripling the rate of social housing being built, by introducing taxes on overseas owners, vacant homes and house-flipping, which would raise as much as £4 billion a year, to be earmarked for social housing.
Table: Potential tax revenue raised by SMF’s proposed housing ‘fairness taxes’
Source: SMF analysis (methodology in the blog)
Sir Keir Starmer made a housebuilding target of 1.5 million homes and planning reform the centrepiece of his Party Conference speech last autumn, but the policy area was notably absent from the ‘pledge card’ he released last week. The SMF say that if Labour is still serious about unlocking housing supply and making housing more affordable, it will need to invest in social or ‘affordable’ homes.
In 2023, only 9,561 social homes were built in England. With 22,023 sold or demolished, the social housing supply continues to shrink. The SMF’s proposed housing ‘fairness taxes’ could raise nearly £4 billion, and triple social housing construction to over 30,000 a year. Alternatively, this revenue could be added to the Affordable Homes Programme’s budget, which could then deliver an additional 340,000 affordable homes (which includes social housing – see notes) by 2026, according to SMF’s calculations.
Countries like Canada, Australia and New Zealand levy greater charges on foreign buyers and empty properties than the UK, and (unlike the UK) they also tax houses sold soon after purchase. Whilst these housing excise taxes have generally failed to increase housing supply (see notes) – the SMF finds that they have been effective at raising money.
Equally, if these taxes do not raise revenue but instead deter foreign ownership, leaving homes vacant and house flipping, this would still be a positive outcome for the UK’s housing market, as it would free up more properties for people looking to get on the property ladder, the SMF notes.
Jamie Gollings, role at Social Market Foundation, said:
“Fully funded policy pledges are the order of the day in Labour, as the six ‘first steps’ demonstrated. Taxing things that can hurt supply such as vacant properties, house-flipping and foreign property investment could give the Treasury a multi-billion pound windfall a year. Even if international evidence shows that these measures might not do much to help unlock supply, the extra taxation raised should be used to build social housing and help the UK on its way to its 300,000 homes a year target.”
Notes
- The SMF blog will be published at https://www.smf.co.uk/commentary_podcasts/the-missing-7th-pledge-triple-social-housing-build-rate-funded-by-housing-fairness-taxes/ on Monday 20th May, 2024.
- Affordable housing is less strictly defined that social housing. Affordable rental housing is charged below 20% of market rents, whilst social housing is typically 50% or less under the market. The Affordable Homes Programme would deliver both types of housing.
- The methodology of arriving at the revenue raised from the taxes, and impact of social housing supply is at the end of the blog.
Contact
- For media enquiries, please contact Impact Officer Richa Kapoor, at richa@smf.co.uk
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