Introduction

In 1980, housing policy in the UK was described as ‘a dog's breakfast’ that could not be rationalised either in terms of declared government housing objectives or the more general aims of the fiscal system (Whitehead, 1980, quoting Crosland, 1975). This chapter explores the extent to which this situation has changed in respect of the interaction between tax and housing policies in the 40 years since these remarks were made.

The provision of housing is a contentious issue for governments, as they seek to balance the scales between providing affordable but quality homes for a growing population, providing reasonable returns for ‘investors’ to support the development of the desired housing stock to supplement public investment, and enabling homeowners to develop a valuable asset that they can own, enjoy and (potentially) pass on to their heirs or use to support later life care costs.

In this chapter, we will focus on the taxation-related tools used by governments in creating the national housing supply. The use of general taxation is key to the provision of direct public revenue to support these housing objectives. However, governments also make use of varied tax interventions that are directly housing related, including providing a variety of tax reliefs and applying a mix of various taxes specifically on housing, including stamp duty, council tax (developed more fully in Chapter 12), capital gains tax (CGT), inheritance tax (IHT), income tax and value added tax (VAT). We will touch on how each of these are used in this chapter.

Housing-related taxation can be used to shape the overall structure of housing provision by directly influencing the attitudes and behaviour of households and individuals. Since 1980, for example, there has also been a growing emphasis on the home as an asset, rather than just a consumption good. As we shall see, the treatment of the home as an asset reflects a longstanding policy and fiscal bias that favours owner-occupation (Kemeny, 1981, Ronald, 2008), arguably leading to even more of a ‘dog's breakfast’ than the housing policy of the 1970s and ‘80s.