Researchers have calculated that the government could raise more than £86m a year for social and affordable housing by imposing a premium property tax on luxury London homes bought by the global super-rich.
Properties in the capital, worth £5m or more sold for a combined £5.2bn between 2011 and 2013, with sales to uber-wealthy overseas buyers making up half that amount, according to academics from Goldsmiths, Sheffield, and York universities.
A 10% levy on those sales would have generated £260m, or £86.7m a year, to help key workers, such as teachers and social workers, and those on low incomes struggling to buy or rent in the capital.
One of the lead researchers, Professor Rowland Atkinson of Sheffield University, said a tax imposed by the central government on luxury property sales could be used to create an inclusive city fund to help counteract the adverse impact of super-rich investment on London’s housing market.
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Atkinson said the research suggested that a 10% levy would not deter the super-rich from investing in London because no other international city offered the same level of luxury services, cultural attractions, and relative safety.
A dedicated fund to provide housing for key workers and those on low incomes could also encourage further philanthropic donations from the uber-wealthy, said Atkinson, an expert on gentrification and social exclusion: “We need a kind of billionaire bonus fund where [the super-rich] publicly say, ‘I’ve got all this money, and I will sink some of this into a housing infrastructure fund that tackles the problem of affordable housing for key workers,”
His comments came after the second reading in the House of Lords of the government’s housing and planning bill, which critics fear will spell the end of social housing in London.
The researchers write that the UK government “appears to see its function increasingly like that of an auctioneer presiding over the discounted sale of state assets, including swaths of the capital’s land to foreign investors … This latent bias towards the wealthy emerges in planning diktats, welfare changes, and housing plans, as the city acts to divest itself of what is seen as redundant human capital, now marked by the displacement of welfare recipients and, symbolically, through the demolition of public housing estates in favor of ‘mixed-use sites.”
Atkinson called on politicians to take a braver stance in making the global super-rich pay for the privilege of buying in the capital, which the research found was “now positioned at the apex of global rankings of wealth.”
In a briefing paper, the researchers also call for higher bands of council tax for the global super-rich, with the top-level imposed on those who leave their homes vacant for more than three months a year.
According to the researchers, there has been a dramatic rise in overseas buyers of London property since 2007. The global uber-wealthy are concentrated in Kensington and Chelsea, Westminster, and Camden. In 2011 alone, they accounted for more than £5bn worth of housing sales. , Within Westminster, 69% of homebuyers in Knightsbridge in 2011 were from overseas, while in both Belgravia and St John’s Wood, the figure was 60%. In Mayfair, just over half says prime estate agent Savills.
Yolande Barnes, director of world research at Savills, said increasing the number of council tax bands was a more progressive levy on property bought by the super-rich than a one-off flat tax. Barnes, who was on the advisory group to the study, said: “It would make the housing tax paid more proportionate. A mansion tax does not deal with occupation, which council tax does [with extra charges].”
Other recommendations include closing tax loopholes and improving the transparency of property deals by forcing overseas buyers to disclose their identities to prevent money laundering.
The researchers write that in kowtowing to the desire of the super-rich for more luxury homes and mega-basements, central and local governments have rolled back the welfare state and cut the supply of social and affordable housing to clear poor and low-income residents from prime areas of the capital.
London is now home to 376,600 high-net-worth individuals, with investable assets of more than £700,000 ($1m), several thousand ultra-high-net-worth individuals, and more than £21m, and 80 billionaires.
The researchers warn that this has accelerated house price rises, leaving low and middle-income residents increasingly unable to afford a mortgage or rent.
Although the alpha territories of London make up just 16% of the city, they account for around a third of the total value of property sales – more than £44bn between 2011 and 2013. The 10 most expensive property sales recorded by the Land Registry in that period ranged from £20.5m in Westminster to £55m in Chelsea.
The study found that “the city has become a pre-eminent location for capital accumulation and wealth storage, particularly in prestige areas (the prime and super-prime [housing] markets), yet it has also become the playground of the extremely wealthy.”
Kensington and Chelsea’s council said: “We have thousands of older residents who bought their homes many years ago. They may now own valuable homes, but their incomes are often fixed and modest. Large increases in local taxation may push some of these residents into poverty and others out of the borough altogether.”
A Treasury spokesman said: “This government is already taking strong action to ensure fairness in the housing market and help people on to the housing ladder. In 2014, we introduced a higher rate of stamp duty for properties over £1.5m, and from April 2016, additional properties will face additional rates of stamp duty. This will enable us to double the affordable housing budget.”