The trouble with a land value tax – and a way round it

How do we stop the idiocy of the need for ever rising house prices being hard-wired into the UK economy?

I’ve written at length about the concept of a land/location value tax (LVT) here and elsewhere. My most recent piece on the matter is here. But I’m not the only person thinking about it – even Martin Wolf mentioned it in a recent FT column.

One of the many problems with introducing an LVT, however, is the huge number of generational losers it would instantly create: anyone with a house with a high location value (think London and the south east) would instantly lose a fortune in housing wealth as the tax pushed prices down.

But there might be one way around this. A letter to the FT on Monday suggested the “from here on” LVT. This, said the writer, DBC of Northampton, “sets a datum line and taxes any land inflation from then on, leaving the property owner in possession of the existing value and the banks with collateral for their mortgages.”

Homeowners lose nothing but the “something for nothing’ of future house price inflation and “all demand stimulus from thence on would go into the general consumption of goods and services rather an being top sliced by a household’s rent and mortgage obligations as land and then house prices stabilise.”

It’s a good idea. Any thoughts on whether it would work?

PS Martin Wolf partially suggests this in this 2010 article. And he has done a nice video on it here, too.