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Wednesday, 23 May 2018

Can we imagine a better world, one where the housing crisis is ‘fixed?
What kind of payoff can home-owners expect from the LVT revolution?

Currentlythe payoff, the motivation for home-owning is the promise of 
1.     Somewhere to live, even if it’s pokey and shoddy and very expensive. Typically, first-time buyers have to pay out as much as 30 or 40 percent of their after-tax wages to pay for the mortgage.
2.     You have the status of ‘homeowner’ (as a member of the Great Home Owning Democracy). Mortgaged or not, this applies even if you are a lease-holder, but it is even better to be a freeholder.
3.     You can look forward to Capital gains,  which is the lure wealth gained without working for it. This wealth is created by house price inflation. When you are a young first time buyer, it seems to be well worthwhile paying out a huge proportion of income (30 or 40%) to ‘get on the (free money) ladder’. As time passes the repayments reduce and the equity—the value of your house minusthe mortgage outstanding—increases. Result!

Post-LVT home-owning would change for the better because 
1.     You still have somewhere to live but with more space, mostly new houses, better built and equipped, and cheaper and more efficient to run.  Purchase cost would generally be far less. So first time buyers need only shell out a modest 10% of their wages. Last-time owners may find they are still paying out a small amount in tax.In total, over a life time of home-owning and/or renting, we would be paying far less, and getting much better homes to live in.
2.     The status of homeowner would be less significant. The flexibility of renting would come without any long-term financial penalty (“paying rent is dead money” would no longer hold.) Renting rather than buying can often a better way to ‘consume housing services’.
3.     The lure of Capital Gain would be no more (and anyway, as I show, it was never much of a benefit to living home-owners during their own their lifetimes).
4.     Advocates of LVT would also claim thatthere could be massive tax reductions. Currently the Banks cream off billions from the hard-pressed home-buyers via mortgage interest charges. LVT should divert that into tax revenues for local and central government. This could be used it to slash Income Tax and VAT.  

Or as Paul Mason puts it “the move by capital towards asset-based incomes, parasitism and semi-legality, and the move towards credit dependency among the working population are twin phenomena which, taken together, look like the primary dysfunction.” (New Statesman, 18 May 2018) 
Nowhere is this more obvious than in the Housing Market. The bankers need all you aspiring home-owners to continue taking out those super-sized mortgages to keep their (non-productive, finance-based) racket going. They ‘deal you in’ with promises of future wealth from continued house price inflation, promises which even now, rarely come true.  LVT would take you out of the rentier, parasite class and cut back on the biggest of the bankers’ rackets. Hurrah! But you stand to lose the chance of becoming wealthy without working for it. Boo? But LVT can also ‘make (productive) work pay better, if Government uses the revenues wisely. So everyone couldbecome wealthy by working and saving thanks to LVT.

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