This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/commentisfree/2017/aug/15/housing-greed-new-heights-newham-london-tax-racket-bad-policy
The article has changed 5 times. There is an RSS feed of changes available.
| Version 2 | Version 3 |
|---|---|
| Housing greed has reached new heights. Look at the Newham tax racket | Housing greed has reached new heights. Look at the Newham tax racket |
| (about 5 hours later) | |
| Tue 15 Aug 2017 14.59 BST | |
| Last modified on Fri 15 Sep 2017 20.16 BST | |
| Share on Facebook | |
| Share on Twitter | |
| Share via Email | |
| View more sharing options | |
| Share on LinkedIn | |
| Share on Pinterest | |
| Share on Google+ | |
| Share on WhatsApp | |
| Share on Messenger | |
| Close | |
| Another housing scam has been uncovered. Up to 13,000 landlords, almost half of a total of 27,000 in the London borough of Newham alone have failed to declare their rental income. Scaling this figure up to the London level, unpaid tax is costing the public purse nearly £200m. Who’s surprised? From the global elite leaving properties empty to rogue landlords and the hideous Grenfell Tower fire – our housing system has come to represent all that is wrong with free-market capitalism. But we shouldn’t kid ourselves that this new finding is a simple reminder that our housing system is flawed. It’s far worse – levels of house hoarding alongside this added reluctance to pay tax shows that housing greed has reached new heights. | Another housing scam has been uncovered. Up to 13,000 landlords, almost half of a total of 27,000 in the London borough of Newham alone have failed to declare their rental income. Scaling this figure up to the London level, unpaid tax is costing the public purse nearly £200m. Who’s surprised? From the global elite leaving properties empty to rogue landlords and the hideous Grenfell Tower fire – our housing system has come to represent all that is wrong with free-market capitalism. But we shouldn’t kid ourselves that this new finding is a simple reminder that our housing system is flawed. It’s far worse – levels of house hoarding alongside this added reluctance to pay tax shows that housing greed has reached new heights. |
| Newham, the home of the incredibly successful London Olympics in 2012 and recent World Athletics Championships, has gone through a housing transformation. With the announcement of the Olympics, many saw the opportunity to make money. The regeneration of the borough – or as others would call it, the social cleansing – has increased the number of privately rented housing to 40% of the housing stock, the highest proportion of all London boroughs. The effect of the drop in home ownership means that residents become transient and many social housing tenants are pushed out. It’s a typical story. I was born in Leytonstone and have lived in east London most of my life. I’ve seen many childhood friends priced out – and the community centre where I use to learn Urdu now sells vegan cakes to well-to-do TV producers. | Newham, the home of the incredibly successful London Olympics in 2012 and recent World Athletics Championships, has gone through a housing transformation. With the announcement of the Olympics, many saw the opportunity to make money. The regeneration of the borough – or as others would call it, the social cleansing – has increased the number of privately rented housing to 40% of the housing stock, the highest proportion of all London boroughs. The effect of the drop in home ownership means that residents become transient and many social housing tenants are pushed out. It’s a typical story. I was born in Leytonstone and have lived in east London most of my life. I’ve seen many childhood friends priced out – and the community centre where I use to learn Urdu now sells vegan cakes to well-to-do TV producers. |
| But the scale of the Newham rental tax scam shows that it is not just greedy corporate property managers or top earners who are being greedy when it comes to housing, but home-owning middle-class families. And can you blame them? House price inflation has been over 1400% since 1997. The returns on housing investment, coupled with pension uncertainty, mean that even those with modest incomes, such as friends who are electricians or teachers, are joining the buy-to-let market if they can. | But the scale of the Newham rental tax scam shows that it is not just greedy corporate property managers or top earners who are being greedy when it comes to housing, but home-owning middle-class families. And can you blame them? House price inflation has been over 1400% since 1997. The returns on housing investment, coupled with pension uncertainty, mean that even those with modest incomes, such as friends who are electricians or teachers, are joining the buy-to-let market if they can. |
| No one can argue with the logic at the individual level, but this trend does mean that with a declining number of first-time buyers, the gap between the housing haves and have nots is multiplying at an alarming rate. The richest 1% of adults, some 488,000 people, own 14% of the nation’s assets – worth about £11tn. At the other end of the financial scale, 15% (7.3 million people) either own no assets at all, or are in debt. And things are potentially about to get a lot worse – house prices are forecast to rise by 50% over the next eight years, according to the National Association of Estate Agents and the Association of Residential Letting Agents. | No one can argue with the logic at the individual level, but this trend does mean that with a declining number of first-time buyers, the gap between the housing haves and have nots is multiplying at an alarming rate. The richest 1% of adults, some 488,000 people, own 14% of the nation’s assets – worth about £11tn. At the other end of the financial scale, 15% (7.3 million people) either own no assets at all, or are in debt. And things are potentially about to get a lot worse – house prices are forecast to rise by 50% over the next eight years, according to the National Association of Estate Agents and the Association of Residential Letting Agents. |
| With so much extra wealth why aren’t landlords paying taxes? Because greed begets more greed. Putting aside the complexities of the tax system and self-assessment, there is only one reason why people don’t want to pay tax on their rented properties – they don’t think they owe the state anything. | With so much extra wealth why aren’t landlords paying taxes? Because greed begets more greed. Putting aside the complexities of the tax system and self-assessment, there is only one reason why people don’t want to pay tax on their rented properties – they don’t think they owe the state anything. |
| Counting your housing wealth as your own hard-earned money is commonplace, but utterly wrong. Yes, some people have invested in renovation and extensions, but these changes do not account for the exponential rise in house prices. The Resolution Foundation found that around 80% of net property wealth growth since the early 1990s has been a consequence of a housing boom, rather than active savings decisions by households. So despite popular belief, an inheritance tax of 40% over £325k is hardly unfair, and nor is paying tax on rental income. | Counting your housing wealth as your own hard-earned money is commonplace, but utterly wrong. Yes, some people have invested in renovation and extensions, but these changes do not account for the exponential rise in house prices. The Resolution Foundation found that around 80% of net property wealth growth since the early 1990s has been a consequence of a housing boom, rather than active savings decisions by households. So despite popular belief, an inheritance tax of 40% over £325k is hardly unfair, and nor is paying tax on rental income. |
| I’m not one for quoting Ronald Reagan, but he once said: “If you want more of something, subsidise it; if you want less of something, tax it.” This is one area where this approach makes sense, but for the last 30 years we have been doing the opposite. We’ve created the incentives for people to hoard housing, and have loosened credit to fuel the housing boom. The byproduct has been encouraging individualism and greed for today’s most precious commodity – housing. While Newham council have taken action to identify and punish rogue landlords through an innovative licensing scheme, the government has blocked such initiatives elsewhere. | I’m not one for quoting Ronald Reagan, but he once said: “If you want more of something, subsidise it; if you want less of something, tax it.” This is one area where this approach makes sense, but for the last 30 years we have been doing the opposite. We’ve created the incentives for people to hoard housing, and have loosened credit to fuel the housing boom. The byproduct has been encouraging individualism and greed for today’s most precious commodity – housing. While Newham council have taken action to identify and punish rogue landlords through an innovative licensing scheme, the government has blocked such initiatives elsewhere. |
| Tax also makes sense where there are societal costs to individual actions. The consequences of an overheating housing market, high rents and limited available housing are huge. Higher housing costs means higher household debt and lower consumption. Not the ingredients for a sustainable economy. And what about the communities destroyed as neighbourhoods are gentrified? Newham has some of the highest levels of deprivation in the country and like elsewhere has seen growing queues at foodbanks. How are people so blind to the link between paying tax and stronger public services and communities? It feels as if we’ve let housing go to our heads and it’s destroying our empathy. | Tax also makes sense where there are societal costs to individual actions. The consequences of an overheating housing market, high rents and limited available housing are huge. Higher housing costs means higher household debt and lower consumption. Not the ingredients for a sustainable economy. And what about the communities destroyed as neighbourhoods are gentrified? Newham has some of the highest levels of deprivation in the country and like elsewhere has seen growing queues at foodbanks. How are people so blind to the link between paying tax and stronger public services and communities? It feels as if we’ve let housing go to our heads and it’s destroying our empathy. |
| The truth is if we are going to set the housing market straight, homeowners are going to have to take the hit. With limited housing supply we can’t sit back as people buy multiple houses while others are stuck on extortionate rents. Instead, we should spread housing wealth through higher and better collection of taxes on rental income, restrictions on foreign buying and a huge council housing building initiative. It’s time we break the hold that housing greed has on us and resist the instincts implanted from 30 years of bad policy. | The truth is if we are going to set the housing market straight, homeowners are going to have to take the hit. With limited housing supply we can’t sit back as people buy multiple houses while others are stuck on extortionate rents. Instead, we should spread housing wealth through higher and better collection of taxes on rental income, restrictions on foreign buying and a huge council housing building initiative. It’s time we break the hold that housing greed has on us and resist the instincts implanted from 30 years of bad policy. |
| • Faiza Shaheen is the director of the Centre of Labour and Social Studies | • Faiza Shaheen is the director of the Centre of Labour and Social Studies |
| Housing | |
| Opinion | |
| Communities | |
| Renting property | |
| Property | |
| London | |
| Inequality | |
| comment | |
| Share on Facebook | |
| Share on Twitter | |
| Share via Email | |
| Share on LinkedIn | |
| Share on Pinterest | |
| Share on Google+ | |
| Share on WhatsApp | |
| Share on Messenger | |
| Reuse this content |