Comments on: How to fix the UK’s housing mess http://blogs.reuters.com/hugo-dixon/2014/05/19/how-to-fix-the-uks-housing-mess/ Mon, 18 Apr 2016 14:55:08 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: johnjones http://blogs.reuters.com/hugo-dixon/2014/05/19/how-to-fix-the-uks-housing-mess/comment-page-1/#comment-793 Wed, 21 May 2014 07:21:01 +0000 http://blogs.reuters.com/hugo-dixon/?p=798#comment-793 The reason why these ideas won’t be implemented is an illustration of the difference between being an economics journalist and being an elected politician.

The latter has to worry both about how things look politically and about how the voters will react. Both considerations come ahead of any economic fundamentals.

That’s why no Tory government is going to impose a range of new and/or increased taxes on home-ownership: whatever the rational case for taxing “imputed income” from living in one’s own home and in particular for removing the CGT exemption for owner-occupied properties, which allows most British property owners to trouser untaxed windfall gains they can then use to pole-vault up the ladder with a massively-leveraged deposit, Conservative voters in particular, who are much more likely to be home-owners, would revolt in droves at what they’d see as a “tax-grab” on what they think of as their personal wealth.

The problems are no easier for left-wing politicians to address, not least because there are over-riding temptations to show-boat and play to the gallery with measures targeted exclusively at small and unpopular groups of wealthy people whom left-wing politicians and voters dislike rather than at the mass of home-owners whose behavior is really driving the market. So Labour and the Lib Dems are all for “mansion tax” (even though it’ll only apply in a minority of instances and the super-rich, as usual, will find a way around it). And they might also be tempted to target buy-to-let owners, even though every serious piece of economic research done by housing specialists has shown that this sector is not what is pushing house-price inflation in the UK. But while buy-to-let is unpopular as so a politically-attractive target, Labour and the Lib Dems are highly unlikely to want to apply CGT or a tax on “imputed income” to owner-occupied properties because there are simply too many of them, owned by far too many voters, for it to be electorally palatable.

So, no real change then. And here we go again….

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