Labour’s proposals for the introduction of a “Mansion Tax” levied on homes worth more than £2m have been the subject of numerous headlines and newspaper column inches since Ed Miliband confirmed the party’s commitment to introducing it should they form a government after next May’s General Election.
Whilst the critics have been numerous, and rightly so, it is becoming clear that many within the Labour Party also do not believe the policy to be fair, credible or deliverable.
Take for example the comments made by prominent London Labour MP and London Mayor hopeful, Dame Tessa Jowell, who said: “I am concerned about my typically older families who are asset rich and income poor. They bought houses 40 years ago, which have appreciated enormously in value and they certainly can’t afford a mansion tax.”
Yet very little has been said by our own Labour MP for Hammersmith, Andrew Slaughter. This is rather strange, given that the Borough contains over 2000 homes valued at £2m+.
Of course this may be explained by the fact that Mr Slaughter is one of Miliband’s strong admirers and as a Shadow Minister has to be supportive of Labour Party policy.
However, let’s be in no doubt of the potential impact a “Mansion Tax” would have upon Hammersmith and Fulham, were it to be levied either at the starting threshold of £2m, or as some have suggested, at a lower rate.
Thus far Labour have been vague as to the details of the proposed new tax, but one thing immediately stands out – the £1.2bn target for annual income generation they have set. To raise a sum even close to this figure would require virtually no exemptions and a collection regime which ensured nearly 100% collection.
More likely, according to residential analysts, is that in order for future Labour Government to meet its income target, the threshold would be reduced to £1.5m or potentially lower once all the exemptions and cost of collection are allowed for.
Of course, Labour deny this, but the temptation to do so against underperforming collection targets would be a strong one to resist, especially if it meant making the funding shortfall up from somewhere else.
Nor can we discount Labour relaxing its position and allowing the real threshold to be lowered through the impact of property inflation and subsequent drag for properties currently just below the threshold as a means of achieving envisaged income targets.
So whilst under the last Labour Government the motorist was used as an unwilling cash cow, so it seems homeowners will be under a future Labour one. However, and here so far there has been very little focus on the consequences of the Mansion Tax, it won’t only be homeowners/owner occupiers who will be impacted by it.
The introduction of the tax will also have major implications for those in the private rented sector who rent properties valued at over £2m, typically in our Borough large family homes on our terraced streets.
Whilst the landlord will have to pay the tax will they absorb the cost? I doubt it. Or will they pass it onto their tenants through an increase in rents thereby driving up rents? Very Likely.
Key questions remain over whether social housing in high value locations like Hammersmith & Fulham will be exempt from the new tax. Again there has been little clarity of this issue from Labour.
For within H&F there are still a significant number of large family-sized social homes situated on some of the most expensive and desirable streets in the Borough which could be captured by the threshold for the tax, especially if it is subsequently lowered.
So what would then happen in this case if no exemption was granted?
Would councils and housing associations have to dispose of mansion taxable properties to avoid the levy, thereby displacing existing tenants, or would they have to pay the tax which would have to come from the revenue bottom line – surely it cannot be right in any measure that the poorest in society would have to pay for the “Mansion Tax” via their social rents?
Also, would we see an increase in the breakup of the large family homes the Borough so desperately needs into flats as owners seek to escape the new tax? For the temptation for a cash poor owner of a £3m property to create two £1.5m flats would be fairly strong.
So whilst all the talk thus far has been on the impact upon homeowners it is clear that those in the private rented sector and in social housing may be the victims of the unintended consequences of the tax unless Labour spells out clearly the detail of the proposal. For the reality is in Hammersmith & Fulham that all tenures will be captured in some way or another with potentially deeply negative results.
So far the local Labour Party has had very little to say on the matter, which is curious given the potential significant impact the “Mansion Tax” will have upon the Borough. It may, of course, help to focus the Leader of the Council’s mind if I point out that large family houses on streets like Inglethorpe would most certainly be captured by the tax or getting very close it.