IFS Zooms In: The Economy
How is tax damaging the housing market?
Dec 18, 2024
Join Stuart Adam, a Senior Economist at IFS specializing in housing taxation, and Tim Leunig, an economist from the London School of Economics with a rich advisory background, as they delve into the UK housing market's struggles. They discuss how taxes like stamp duty and council tax impact affordability and market dynamics. The conversation highlights inequities in the tax system, challenges for landlords, and proposes reforms to address the ongoing housing crisis. Discover how these tax policies shape housing choices and the broader economic landscape.
37:47
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Quick takeaways
- The UK housing market is hindered by a regressive tax system that fails to reflect current property values, necessitating urgent reform.
- Stamp duty creates disincentives for homeowners to move, thus limiting mobility and exacerbating housing market inefficiencies.
Deep dives
The Current Housing Tax Landscape
The UK housing market faces significant challenges, primarily driven by issues of affordability and availability due to the tax system's structure. Key taxes affecting the housing sector include council tax and stamp duty, which are seen as problematic due to their regressive nature and outdated valuation methods. The current council tax system is based on property values from 1991, creating inequities where properties of vastly different values may incur similar tax bills. As a result, there is a growing consensus that reforms are necessary to make the tax system more equitable and reflective of current property values.
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