Families worse off under 'unfair' Council Tax system

Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance

Families in cheaper homes are paying an unfair amount of Council Tax which the Government must address with radical reforms, a new report claims.

The Joseph Rowntree Foundation's (JRF) research has found that a family living in a £320,000 house has to pay only twice as much as a family living in a £68,000 house - even though their home is four times as valuable.

The report estimates that 3.7 million households are worse off as a result of the failure to revalue Council Tax because households would have moved down bands. It calls on politicians to revalue Council Tax bands to reflect real house prices and act as a brake on house price inflation.

The JRF's new report checks on progress against proposals outlined in its 2011 report, 'Tackling housing market volatility'. The new report recommends:  

• An insurance partnership scheme where borrowers, lenders and the Government each make a contribution to a pooled fund that can cover struggling homeowners’ mortgage costs. This would prevent repossessions and provide an effective safety net.

• Focus on developing serious alternatives to home ownership by increasing the availability of social rented homes and intermediate tenures such as shared ownership, as well as reforming the private rented sector to give renters more security. The insecurity of private renting is particularly damaging for families trying to make a long term home in the sector.

• More investment in meeting our housing supply needs. Even if every Government policy and scheme succeeds, by the end of 2015 we will still have 310,000 fewer homes than we need -750,000 homes are required by 2015. The failure to produce sufficient new housing is a root cause of volatility.

Kathleen Kelly, Programme Manager for Place at JRF, said: “As MPs gather for their party conferences and the new housing minister settles in, now is the time to fix the underlying problems in the housing market. It will take huge political courage to achieve this - but we cannot afford to leave people or our economy helplessly exposed to our volatile housing system.

“Attempts to build thousands more homes are welcome and badly needed to overcome the high prices that lock so many out of ownership.  But they won’t come quick enough for those who are struggling today. We need radical tax reform that would reduce volatility and offer a better deal to millions of households, while developing alternatives to ownership so people have access to stable tenancies in both the social and private rented sector.”

Mark Stephens, co-author of the report, added: “Overall, the steps taken by the Government fall far short of the fundamental overhaul we desperately need to create a stable housing market. Tackling issues such as property taxation require political bravery and there is an important longer-term prize at stake: a more stable system that has a greater social benefit than the four boom and bust cycles we have experienced since the 1970s. But in some ways this progress report shows we are moving further away from a stable housing market.”