Revenue can then be used to aid those seeking homeownership, it suggests
The UK could benefit from adopting ‘housing sin taxes’ similar to those in use in Canada, Australia, and New Zealand, which target vacant homes, house flipping, and purchases by foreign buyers, a think tank has proposed.
According to a report released by the Social Market Foundation (SMF) and funded by the Nuffield Foundation, such measures could provide a significant revenue stream to the UK, and while these taxes have not significantly boosted housing supply, they have been successful in generating funds in other English-speaking countries.
The SMF suggests that the UK, which has the lowest homeownership rate among its peers and where households spend over a quarter of their disposable income on housing, could use the additional revenue to support initiatives like council tax rebates for private sector renters. This would aid in saving for a deposit, thus improving the chances of purchasing a home.
Currently, the UK imposes a 2% surcharge on property purchases by non-citizens or non-residents in England and Northern Ireland, a rate significantly lower than those found in Australia or Canada. For instance, Australia has excise taxes on non-residents that can reach up to 15% in some states, while in Canada, they can go as high as 25%. The report estimates that a 25% tax on foreign buyers could generate £855 million annually.
According to the SMF report, the UK also hosts around 1.5 million vacant properties and taxing these at just 1% of their value could yield substantial revenue, with Australia and Canada setting precedents by taxing vacant homes up to 3% based on location.
Moreover, the think tank said that taxing profits from house flipping — selling properties shortly after purchase — could discourage the practice and generate additional funds. It estimates that a 50% tax on such profits in the UK could raise £550 million per year.
The SMF’s recommendations to increase homeownership access include providing council tax rebates to help renters save for deposits, offering insurance for high loan-to-value mortgages, mandating banks to offer information on long-term fixed-rate mortgage deals, making council tax more progressive, and reforming stamp duty.
Gideon Salutin (pictured), senior researcher at the Social Market Foundation, emphasised the potential of utilising the revenue from these proposed taxes to support those struggling in the housing market.
“One and a half million homes are left vacant in the UK, while 200,000 are owned by individuals who are not residents in the country,” he said. “At a time when the country is desperate for homes and the government desperate for money, we should be using these as sources of revenue, rather than letting them sit idle. The billions in revenue these taxes could generate should be used to help those losing out in the housing market.”
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