Here’s why Philip Hammond should abolish stamp duty

Looks like he’s thinking about it. Image: Getty.

When it comes to causes of the housing crisis, stamp duty land tax is far from the most important. And since it claws nearly £12bn out of primarily well-off peoples’ hands, many of those who care about housing will be content to let sleeping dogs lie, unpopularity notwithstanding.

But stamp duty does a lot more damage than it might seem – and when the housing market is so broken, it’s especially important to support any politically-achievable change that might make things a bit better.

Back in 1997 less than half of housing transactions faced stamp duty at all, and when they did, it was at a proportional 1% rate all the way up the schedule – that is, for houses worth both £50,000 and £2m (although there were next to no houses in the country worth £2m back then). Ever since then, politicians of both parties have been unable to resist ratcheting the rate up: the top rate is now 12 per cent.

It is progressive. But taxes on bicycles, using the train, and eating free range chicken would be progressive: progressivity isn’t the be-all and end-all of a particular tax, even if we want the system to be very progressive overall. There are many ways to soak the rich and if we want to do it then we should do it in a way that causes the least collateral damage to the economy at large – that is, to the rest of us.

Stamp duty is uniquely bad by this measure. The key problem is that stamp duty stops people from moving.

Housing ownership needn’t be the tenure that most people aspire to, but in practice it is. That means that, for people to live in a place they love, close to their family or friends, in range of a job they want – or indeed near that job so they don’t have to endure a hellish commute – they often need to own a house there. To own a house there, there needs to be a house there, and that’s why the most important solution to the housing crisis is building more houses. But even of the stock we have, we can use them more efficiently.

However, we do most of our property taxation specifically by taxing these moves. We barely (and regressively) tax people for occupying expensive property – or valuable land – through our ageing, ailing and increasingly preposterous council tax system. But we tax them heavily and progressively when they move.

Economists have tried to measure the effect many times, and find that even in the middle of the distribution, where tax rates are relatively modest, the impact can be large. The best research papers typically find that a 1 per centage point increase in tax rate cut property transactions in the affected range by something like 10 per cent – sometimes larger in the short run, when including re-timing to take advantage of a lower rate.

My suggestion is that the chancellor abolish it in the budget this year. Taxes don’t typically get abolished, but stamp duty isn’t a typical tax.

And there is an obvious place to get the revenue back: council tax. Council tax is regressive by design, and has become more regressive over time as property prices in certain parts of the country have soared, and yet have faced no extra tax due to already being in the top band.

This banding itself is ridiculous. New build homes are put in bands based on what they would have been worth in 1991, assuming nothing had changed. So Brixton, for example, is still assumed to be cheap and relatively run-down, and new flats in swish Oval Quarter worth hundreds of thousands of pounds are in band C, paying peanuts.

Reforming council tax so it taxed properties at around 10-15 per cent of their rental value up the scale, like if VAT was on housing services, would easily cover the cost of scrapping SDLT. It would be similarly progressive, fairer, and have none of the damaging economic disincentives to moving.

No, it wouldn’t solve the housing crisis – but none of the real solutions to the housing crisis are on the table. This move is exactly the sort of thing a Tory chancellor could and would do. And at times like these the housing market can do with all the help it can get.

Ben Southwood is head of research at the Adam Smith Institute.

 
 
 
 

To transform Australia’s cities, it should scrap its car parks

A Sydney car park from above. Image: Getty.

Parking may seem like a “pedestrian” topic (pun intended). However, parking is of increasing importance in metropolitan areas worldwide. On average, motor vehicles are parked 95 per cent of the time. Yet most transport analysis focuses on vehicles when they are moving.

Substantial amounts of land and buildings are set aside to accommodate “immobile” vehicles. In Australia, Brisbane provides 25,633 parking spaces in the CBD, Sydney 28,939 and Melbourne 41,687. In high-demand areas, car parks can cost far more than the vehicle itself.

However, parking is not just an Australian problem. By some estimates, 30,000 square kilometres of land is devoted to parking in Europe and 27,000 km² in the US. This parking takes up a large part of city space, much of it highly valued, centrally located land.

Traditionally, transport planners believed that generous parking allocations provided substantial benefits to users. In reality, excessive parking is known to adversely affect both transport and land use. These impacts, along with recent land-use, socioeconomic and technological trends, are prompting cities to start asking some important questions about parking.

Australian planners must engage with emerging trends to help cities work out the best way to reclaim and repurpose parking space in ways that enhance efficiency and liveability while minimising disruption.

Here we chart likely challenges and opportunities created by these trends over coming decades.

Key trends affecting parking space in cities. Image: author provided.

Land use

All Australian cities have policies to encourage densification, consolidation and infill development in their centres. In conjunction, some cities are setting maximum limits on parking to prevent it taking over valuable inner-city properties.

Transit-oriented development (TOD) has also become popular, at least on paper. This is another form of urban consolidation around transit nodes and corridors. It is known to benefit from high-quality urban design, “walkability”, “cyclability” and a mix of functions.

These developments mean that people who live in CBDs, inner-ring suburbs and near public transport stops will use cars less. Consequently, demand for parking will decrease.

Some non-TOD suburbs are trying to replicate inner-city features as well. For example, some suburban shopping centres have introduced paid parking. This is a significant shift from previous eras, when malls guaranteed ample free parking.

Suburbanites who lack easy public transport access will continue to rely on cars. But rather than driving all the way to a CBD, commuters will increasingly opt for park-and-ride at suburban stations, thereby increasing demand for park-and-ride lots at public transport interchanges. However, excessive capacity might hurt rather than help patronage.


Social trends

In addition to land use, several social trends will affect the need for parking.

First, young people are delaying getting drivers’ licences because driving is culturally less important to them than in previous generations.

Second, people of all ages are moving from outer suburbs to inner cities. For many, this means less driving because walking, cycling and public transport are more convenient in inner cities.

 

inally, the emergence of Uber, Lyft and vehicle-sharing arrangements means that people are not buying cars. Research suggests that each car-sharing vehicle removes nine to 13 individually owned vehicles from the road.

Together, these trends point to a reduced need for parking because there will be fewer cars overall.

Technology

The importance of technology in parking is rising – paving the way for “smarter” parking.

The emergence of a host of smartphone apps, such as ParkMe, Kerb, ParkHound and ParkWhiz, has begun to reshape the parking landscape. For the first time, users can identify and reserve parking according to price and location before starting their journeys.

Apps also make available a host of car parks that previously went unused – such as spaces in a residential driveway. This is because there was no mechanism for letting people know these were available.

In addition, smart pricing programs, such as SFPark in San Francisco, periodically adjust meter and garage pricing to match demand. This encourages drivers to park in underused areas and garages and reduces demand in overused areas.

The advent of autonomous vehicles promises to have dramatic impacts on transport and land use, including parking.

According to one school of thought, mobility services will own most autonomous vehicles, rather than individuals, due to insurance and liability issues. If this happens, far fewer vehicles and parking spaces will be needed as most will be “in motion” rather than parked most of the time.

More space for people and places

The Tikku (Finnish for ‘stick’), by architect Marco Casagrande, is a house with a footprint of just 2.5x5m, the size of a car parking space. Image: Casagrande Laboratory.

The next decade promises much change as emerging land-use, socioeconomic and technological trends reshape the need for, and use of, parking. Cities will devote less space to parking and more space to people and places.

Parking lanes will likely be repurposed as cycling lanes, shared streets, parklets, community gardens and even housing. Concrete parking lots, and faceless garages will likely be converted to much-needed residential, commercial and light industrial use.

The ConversationBy transforming parking, much urban land can turn from wasteland into vibrant activity space.

Dorina Pojani, Lecturer in Urban Planning, The University of Queensland; Iderlina Mateo-Babiano, Senior Lecturer in Urban Planning, University of Melbourne; Jonathan Corcoran, Professor, School of Earth and Environmental Sciences, The University of Queensland, and Neil Sipe, Professor of Urban and Regional Planning, The University of Queensland

This article was originally published on The Conversation. Read the original article.