Tuesday 30 November 2010

We own land! Give us money!

I spotted two examples of this type of shroud waving today.
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From The Shields Gazette:

FINANCIAL help could soon be at hand for hard-up South Tyneside homeowners who bought their council property under the 'right to buy' policy.

A Decent Homes programme is being carried out by South Tyneside Homes, with the aim of improving all social rented properties under the ownership of the council. Improvements include external work to blocks of flats and maisonettes, many of which contain leasehold properties. A number of residents living in these blocks are homeowners who will benefit as a result of the value of their property increasing.

But those homeowners, the majority of whom took the opportunity to buy their council home more than a decade ago, face significantly increased service charges to meet the cost of the improvements. Now South Tyneside Council is to make available discount loans of between £750 and £30,000, to help ease the financial burden on leaseholders.

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From BritishBuilder.co.uk:

Cutting VAT on domestic repair and maintenance work would help bring the one million empty properties across the UK back into use, says the Federation of Master Builders (FMB) during the 17th National Empty Homes Week. Turning empty properties into homes would help tackle the growing housing crisis with five million people on social housing waiting lists as well as the 90,000 people living in temporary accommodation

Brian Berry, Director of External Affairs at the FMB said:

"Recent research commissioned by the FMB from the London School of Economics reveals that there is capacity within existing towns and cities to create all the new homes the UK needs and that reusing empty properties is one of the instruments to help fulfill this aim. However, the current rate of VAT is acting as a disincentive for owners of unused properties to bring them back into use. Often it is cheaper to simply demolish and rebuild as new build is VAT exempt.

"Cutting VAT on domestic maintenance and repairs would not only mean many empty properties are brought back into use but would help boost an ailing construction industry by helping to create much needed jobs and apprenticeships for young people. Communities would also benefit too as getting rid of neglected properties would help create better local environments by helping to reduce crime and create demand for local services.

"With house building at its lowest level since 1924 bringing empty homes back into use is a sensible way to help meet housing needs of every community around the UK and cutting VAT on domestic maintenance and repairs would make sure that this happens."


He's (probably) right about the number of vacant homes and the overall benefits of them being done up and somebody living in them etc; he's even right about VAT being The Worst Tax, but he is way off piste if he thinks that reducing VAT on domestic repairs (which is probably not possible under EU law) would get very many properties back into use (surely, there are plenty of builders who'll work cash-in-hand on smaller projects, so there's no VAT, PAYE, nothing), what's needed here is The Stick, not just The Carrot.

If people can make profits by owning land and buildings and leaving them vacant or derelict, then people will do it - the most famous example being Battersea Power Station.

4 comments:

Bayard said...

Often it is cheaper to simply demolish and rebuild as new build is VAT exempt.

Of course, if VAT really was zero rated on essentials, then it would be the other way round, maintenance would be zero-rated and new build would be standard rated, but, as we know, VAT is a universal tax with exemptions for powerful special interests.

Mark Wadsworth said...

B: "VAT is a universal tax with exemptions for powerful special interests."

Never a truer word.

jaffa said...

But you need to remember that new build is zero rated, so to knock down and rebuild is no VAT ro renovate is full VAT. This is a tax on repair/renovation which is often in conflict with the wishes of local people. Most developers want to clear away and cram maximum houses into site. Most locals and often the planners want to keep what is there, if you wait long enough empty property will deteriorate so much it has to be demolished, oh how nice this is exectly what the developer wants.
changing the VAT will reduce the difference in the amount of profit he gets new build / refurbish so in more cases it may be refurbish is affordable.

Mark Wadsworth said...

Jaffa, VAT is far stupider than that. You get a zero-rating if you change the number of units - so convert one house into two flats, convert two flats into one house = zero rated. Renovate one house or two flats = VATable.

So why not get rid of VAT on construction, renovation, home repairs etc entirely, work out what the shortfall is, and then add that to Council Tax or Business Rates (or Land Value Tax or whatever) so that the tax is the same whatever you do? Stick and carrot.