In a previous blog I suggested that all the claims being made for the Help to Buy scheme in attracting new entrants to the housing market were bogus, as putting money into the demand side (effectively to be shared between the landowner/seller and the developer) simply served to maintain if not inflate house prices (actually seen as an advantage by those appointed to assess the scheme!) thereby pricing even more people out than it helped people in.
That is by way of an introduction to another inspired intervention by the previous Chancellor George Osborne. Having torpedoed Gordon Brown before the election of 2010 by hinting at inheritance tax reductions, possibly hampered by his LibDem colleagues, he waited until the Autumn Statement of 2015 to announce that the first £1 million of the primary residence could be exempt from inheritance tax if the house was passed on to a family member. All such measures should have an 'impact assessment' and I would like to know what effect this tax relief is expected to have on the very serious issue of under-occupation? Passing large houses down the family line might not seem to be fair to those just looking for ways to own a small house and without the prospect of benefiting from such an inheritance?
My guess is that the prospect of shielding £1 million from the tax man will be a perverse incentive for a substantial number of people not to downsize. As the tax relief is on second death the incentive seems to be for the surviving spouse to stay in any house worth more than £1 million until they die. If Theresa May is really keen on being seen as an egalitarian and keen to see a fairer distribution of our limited housing resource, then this relief (due to take effect in April 2017) should be repealed by the new Chancellor Philip Hammond.
If not repealed, then regulations should allow the properties to be sub-divided, as will be necessary if the size of the housing stock is to better match the size of households (average 2.3 people and falling) or the owner occupier should be allowed to let out the property while they move to a smaller one, either owned or rented.
The impact of one move within a systems is usually hard to predict even when most of the relevant components of the system and their interrelationships are known. However, it is doubtful that the Chancellor gave a thought to what effect this tax break might have for the distribution of housing. Many people might believe that a Government should have more concern about the provision of housing than about handing out a windfall tax for the rich.