To tackle the inequality between young and old, Britain should tax its housing

Phwoar, look at the tax on that. Image: Getty.

House prices are now so high, particularly in the south of England, that fewer than a quarter of young people under 30 are able to buy homes – and most of these need help from their parents. Renting privately, which is often both expensive and insecure, hardly provides an attractive alternative.

Fixing the dysfunctional housing market is key to levelling the growing inter-generational inequality between the young and the old in Britain. I propose that one way to help do this would be to make substantial changes to the way housing is taxed – including the introduction of a capital gains tax on the sale of all homes – rather than just second ones – and reforms to make council tax fairer.

Home ownership among young adults is in rapid decline. Unless this changes, the millennial generation are likely to be the first generation since the children of the Edwardian era to do worse than their parents across a range of areas in their lives. At the same time, our already flatlining levels of social mobility will decline.

Age-related inequality

In my new book, The Crisis for Young People, I examined the trends in inter-generational inequality in areas including education, employment and welfare. I found that age-related inequalities are increasing in all areas affecting young people – but that the gaps between millennials and previous generations are starkest in housing.

My analysis of data from UK Household Longitudinal Study and its predecessor, the British Household Panel Survey, showed that the proportion of 18 to 34-year-olds owning homes has declined from 46 per cent in 1991 to just 25 per cent in 2013, while the proportion living with parents or renting privately has risen sharply. As the graph below shows, the decline in home ownership has affected all occupational groups among young employees.

The effect of family background on the chances of home ownership has also increased. My research shows that young people from professional families were 1.4 times as likely as those from semi-skilled and unskilled families to own a home in 1991. In 2013 they were 2.4 times as likely to do so.

Home ownership proved to be a major route to social mobility for the many of the baby boomer generation. According to the government’s own data, average house values in the south-east of England rose £5,000 more than average earnings during 2015, which means that many home owners were making more from their home (on paper at least) than from their job. For the millennials this route has virtually disappeared.

Government efforts to create a boom in private house building will not solve this problem. Britain does not have a deficit of housing: there are more rooms per person than ever before and more than a million more homes than households. The problem is that they are often in the wrong place, selling at the wrong prices and being bought by the wrong people – such as by investors and landlords rather than home seekers.

The shortage is in genuinely affordable homes – and this will not be corrected through the building of new homes for private sale since developers have an interest in keeping prices high. The only solution is to provide more social housing and mixed-tenure housing (in which homes are available for rent or purchase), while bringing down the price of privately owned housing through changes in taxation policy.

Capital gains tax on all house sales

People’s main homes are currently immune from capital gains tax. But I believe that the most effective way to bring down house prices would be to impose capital gains tax on the profits from the sale of all private homes, just as it is on the sale of other assets worth more than £6,000.

According to Nationwide Building Society data, average house prices rose by over £100,000 during the seven years prior to the 2008 crash. I estimate that people who owned homes during this period saw their collective property wealth rise by well over £1 trillion, even after discounting for inflation and home improvement costs. Since the under-35s owned less that 4 per cent of this housing stock, this represented a potential transfer of assets from future (young) home buyers to (older) owners of a sum greater than annual GDP at the time.

Had capital gains tax been imposed at 30 per cent on the profits of sales of all private properties between 2010 and 2015, I calculate that it would have raised about £24bn per year for the exchequer, close to what England spends on secondary schools.


Making council tax fairer

Imposing capital gains tax on all home sales might encourage older people not to sell their homes and so create a dearth of properties for sale. The solution to this is to reform council tax so that people pay more for the privilege of living in expensive houses. Those currently owning homes worth over £7m pay only three times what those in houses worth one hundredth of this amount pay.

Properties should be revalued and the council tax bands increased so that the tax is more proportionate to the value of properties. At the same time government should waive stamp duty – the tax currently levied on all house sales over £125,000 – for retired people, so that older people are encouraged to downsize to free up more family homes.

The UK’s private rental market, one of the most unregulated in Europe, is not fit for purpose and also needs major reforms. Rents are too high in many cities, quality often poor – and security for tenants almost non-existent. A new Housing Act could re-establish fair rent tribunals in big cities, provide longer notice periods for tenants, and make it mandatory for all landlords to be licensed and for councils to inspect their properties on a regular basis.

The ConversationRestoring the protections afforded to private tenants in the 1970s, when baby boomers were young, would be a step towards reducing inequality between today’s generations. Re-establishing “fair rents” would be another step, since lower rents would help young people today to save to buy homes, as the majority of their parents’ generation did.

Andy Green is professor of comparative social science at UCL.

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

 
 
 
 

America's cities can't police their way out of this crisis

Police deployed tear gas during anti-racism demonstrations in Los Angeles over the weekend. (Mario Tama/Getty Images)

As protesters took to the streets across the United States over the weekend to express their anger at police killings of unarmed black Americans, it was hard to miss the hypocrisy coming from local authorities – including the otherwise progressive, left-leaning officials who are in power in most major American cities. 

Many US mayors and their police chiefs had issued public statements over the past week that seemed – only briefly, as it turned out – to signal a meaningful shift in the extent to which the Black Lives Matters movement is being taken seriously by those who are in a position to enact reforms. 

The sheer depravity of the most recent high-profile killing had left little room for equivocation. George Floyd, 46, died last Monday under the knee of white Minneapolis police officer Derek Chauvin, while three additional officers helped to hold Floyd down, doing nothing to aid him as he begged for them to stop and eventually lost consciousness. The officers had been attempting to arrest Floyd on suspicion of having used a counterfeit $20 bill at a deli. All four have since been fired, and Chauvin was arrested Friday on charges of third-degree murder and second-degree manslaughter. 

“The lack of compassion, use of excessive force, or going beyond the scope of the law, doesn’t just tarnish our badge—it tears at the very fabric of race relations in this country,” Los Angeles Police Chief Michel Moore told the Washington Post in response to the Floyd case. Meanwhile Moore’s boss, Los Angeles Mayor Eric Garcetti, on Friday claimed that he understood why his city, which is no stranger to police brutality, was protesting. “We absolutely need as a nation, certainly as a city, to voice our outrage, it’s our patriotic duty to not only stand up for George Floyd but for everybody who has been killed unnecessarily, who’s been murdered for the structural racism that we have in our country,” Garcetti said. 

Normally, US police chiefs and mayors tend to ask citizens to withhold judgment on these types of cases until full investigations can be completed. But a 10-minute video recording of Floyd’s killing had made what happened plain. Police chiefs across the country – and even the nation’s largest police union, which is notorious for defending officer abuses – similarly condemned the actions of the Minneapolis officers, in a rare show of moral clarity that, combined with the arrest of Chauvin, offered at least a glimmer of hope that this time things might be different. 

As the events of the weekend have since shown, that glimmer was all too fleeting. 

In city after city over the past three days, US mayors and their police chiefs made a series of the same decisions – starting with the deployment of large, heavily armed riot units – that ultimately escalated violent confrontations between officers and protesters. Images widely shared on social media Saturday and Sunday nights made it clear that members of law enforcement were often initiating the worst of the violence, and appeared to treat protesters as enemy combatants, rather than citizens they were sworn to protect. 


In New York City, two police SUVs were seen plowing into a crowd of protesters, while elsewhere an officer was recorded pulling down a young protester’s coronavirus mask in order to pepper spray his face

In Louisville, the city where Breonna Taylor, a 26-year-old black woman was fatally shot by police on 13 March, state police in riot gear were captured confiscating and destroying protesters’ supplies

In Minneapolis, forces opened fire with nonlethal rounds on residential streets, much to the shock of homeowners standing on their own front porches. 

Images of police pushing or shoving peaceful protesters were almost too numerous to count, including, in Salt Lake City, an elderly man with a cane

In many places, police also targeted journalists who were covering the protests, firing at clearly identifiable media crews with rubber bullets, injuring and even arresting reporters

Some protesters did commit acts of vandalism and looting, and the leaders of cities where that happened generally responded in the same ways. 

First, they blamed “outside agitators” for the worst protester behaviour, a claim that harkens all the way back to the civil rights era and for which the evidence is murky at best

Next, they enacted sudden curfews with little to no warning, which gave law enforcement an excuse to make mass arrests, in some cases violently. 

In a pair of widely criticized moves, Garcetti of Los Angeles closed the city’s Covid-19 testing centers and suspended the entire mass transit system Saturday evening, stranding essential workers on their way home from daytime shifts. Late Sunday night in Chicago, the city’s public school system halted its free meal distribution service for low-income children, citing “the evolving nature of activity across the city”.  

Governors in at least 12 US states, in coordination with city leaders, have since called in National Guard troops to “help”. 

At this point it’s clear that the leaders of America’s cities are in desperate need of a radically different playbook to respond to these protests. A heavily armed, militarised response to long-simmering anger toward the heavily armed, militarised approach to American policing is more than ironic – it’s ineffective. Granting police officers wider latitude to make arrests via curfews also seems destined to increase the chances of precisely the tragic, racially biased outcomes to which the protesters are reacting. 

There are other options. In places such as Flint, Michigan, and Camden, New Jersey – both poor cities home to large black populations – local law enforcement officials chose to put down their weapons and march alongside protesters, rather than face off against them. In the case of Camden, that the city was able to avoid violent clashes is in no small part related to the fact that it took the drastic step of disbanding its former police department altogether several years ago, replacing it with an entirely new structure. 

America’s cities are in crisis, in more ways than one. It’s not a coincidence that the country has tipped into chaos following months of emotionally draining stay-at-home orders and job losses that now top 40 million. Low-income Americans of colour have borne a disproportionate share of the pandemic’s ravages, and public health officials are already worried about the potential for protests to become Covid-19 super-spreading events.

All of this has of course been spurred on by the US president, who in addition to calling Sunday for mayors and governors to “get tough” on protesters, has made emboldening white nationalists his signature. Notably, Trump didn’t call on officials to get tough on the heavily armed white protesters who stormed the Michigan Capitol building over coronavirus stay-at-home orders just a few weeks ago. 

US mayors and their police chiefs have publicly claimed that they do understand – agree with, even – the anger currently spilling out onto their streets. But as long as they continue to respond to that anger by deploying large numbers of armed and armored law enforcement personnel who do not actually live in the cities they serve, who appear to be more outraged by property damage and verbal insults than by the killings of black Americans at the hands of their peers, and who are enmeshed in a dangerously violent and racist policing culture that perceives itself to be the real victim, it is hard to see how this crisis will improve anytime soon. 

Sommer Mathis is the editor of CityMetric.