Expensive homes should not pay more tax

A leading anti-poverty think tank has argued that council tax would be fairer if more expensive homes paid more.

Today, the Joseph Rowntree Foundation (JRF) has published a report into the ‘broken’ housing market, including a number of proposals. One of its suggestions makes me very uncomfortable.

According to the foundation, the council tax system should be made “fairer”, with rates more closely reflecting the value of people’s homes.

Currently, a family living in a £320,000 house ‘only’ has to pay twice as much council tax as a family living in a house worth £68,000 – even though their property is more than four times the price.

The JRF argues that the cheaper home is therefore paying an inflated proportion of its value. It calls this “unfair” and wants tax bands to align more closely with property value.

Living in a more expensive home does not automatically mean you’re rich - there are many reasons people may need large houses

I don’t agree that that this would be a fairer system at all. Perhaps the most obvious point to make is that there’s no correlation between the value of a home and the cost to the council. The bins get emptied as often, the streetlights are the same – it makes no sense.

Furthermore, living in a more expensive home does not automatically mean you’re rich. There are many reasons people may need large houses – perhaps elderly family members live with them, perhaps they are a large blended family.

These households may be struggling each month to find their rent or mortgage payments and going without elsewhere to pay for their bigger house.

Simply assuming they are wealthy and slapping an even heavier council tax burden on them seems far more unfair than the current system.

The suggestion that council tax should be proportional to the value of a property seems just plain unworkable

Perhaps you’re wondering whether larger homes mean larger families, meaning a greater use of local council amenities. You might think that’s a good reason for such households to pay more.

Well, they do already. As we mentioned earlier, the £320,000 household pays twice as much as the £68,000 household. That’s 100% more – quite a hike.

Not only that, but council tax is a per-household charge and not per-person. Large families crammed into small houses don’t have to pay more, and nor should they. But neither should large families in bigger houses.

Finally, the suggestion that council tax should be proportional to the value of a property seems just plain unworkable. Property values are constantly shifting, meaning households would need to be re-evaluated far more regularly.

Raising council tax on large homes won’t help those living in poverty, but it might drive more households towards the breadline.

• Felicity Hannah is a personal finance journalist living in the north of England.

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