Pages 1   2   3   4

14. House Prices

House prices and rent levels in the private rented sector are a continuing cause of concern in terms of social and intergenerational inequity. Demand side measures such as a community land tax on all property owners as part of a tax shift from income taxes to dampen price and rent inflation are now inescapable.

1. With modest economic growth and even taking into account the supply side effects of an annual site tax on development land, the demand for and therefore the price of housing in Ireland might remain relatively high for some time. This is because of our young and growing population and the fact the second hand house market also impacts on general price levels. In a low inflation environment (unlike in the past) high initial costs of housing will remain high over time impacting on social capital. Young people will suffer while older people who have bought their homes or investment property some time ago will continue to gain disproportionately. A further community land tax on all owners of property including residential should be considered urgently. This would immediately reduce the capital value of all housing in the marketplace including that of investment property and as a residual, the value of development land as described before. This measure would have to be well flagged in advance and introduced sensitively to mitigate the burden on recent housing purchasers. It should not increase the total tax burden on the average family but should be undertaken as part of a ‘tax shift ‘ from income taxes to environmental taxes of which land is an important element. (For further detail see Feasta’s submission on Part V.)
2. If instead as is more likely, we face economic stagnation (see Economist report in Irish Time 29/5/03) and house prices fall, a community land tax as part of a tax shift from income tax is still indicated. Taxes on labour and capital dampen investment in these factors and thus economic growth but not annual taxes on land. This is the up-side of the fixed and pre-existing nature of land — in a virtuous circle, the higher the annual taxes on land, the more it is brought into production rather than the opposite with labour and capital.
3. The drop in the value of people’s homes may lead to lower consumer confidence and borrowing (it has no effect on the quality of the housing) but this would be largely offset by higher investment in construction. With buoyant tax receipts from the annual site value tax and community land tax and with extra levies on benefiting landowners form infrastructure, the government could maintain its infrastructure development programme (advisedly with more emphasis on public transport) and thus further compensate for consumer caution.
4. Substantial landowners with investment property may well be net payers under this shift but as land-owning as an activity does not add to GDP, negative macro effects would not arise. However, Feasta recognises that senior citizens dependant on rental income without offsetting income tax savings will lose. For this and other reasons (see Feasta’s policy on Renewable Energy and book; - Irelands Transition to Renewable Energy shortly to be published), we recommend programmes to encourage private and public pension funds to invest in renewable energy generation- which Feasta believes will deliver the most secure returns to investors in the energy-scarce times ahead.
5. It might seem counter intuitive that a tax on land under your property would reduce and not raise land prices but this is the nature of ‘land rent’ as first outlined by the economist David Ricardo in the 19^th C. The fundamental choice is simply this, either the State captures the common share value in land for the community or the private landowner does. If the State does, then the opportunity arises for a reduction in other taxes and an orderly regulation of land prices. If it does not, then land prices will rise in tandem with economic growth and will collapse as growth falters, the balloon bursts and everyone loses (except the very wealthy who invariably win within the present system.)
6. Ideally, the site value tax and community land tax should be raised by the local authority and used to provide housing and other local services supporting sustainable settlements and lifestyles. Local authorities need an independent source of funding to carry out their duties effectively and to ensure genuine local accountability within a democracy.
7. It is worth reiterating again that the community land tax differs from old fashioned rates in a very important respect; - it does not tax the buildings or improvements that the developer or householder has made with their labour and investment but simply the existing but not now acknowledged common share of the value of the land.

15. Access to the Countryside

The controversies around access to the countryside for recreation arise from the fundamental misunderstanding of property rights described earlier. Given the history of the land struggle in Ireland and high subsidisation of farming, the social relations model of property rights suggests that public access rights to uncultivated farmland be recognised in the constitution both through the common share and common good concepts. In addition, a community land tax on farmland would provide an effective framework for sustainable agriculture and rural regeneration.

1. The property ownership concept of property in land creates an image of as single owner with absolute power within rigidly defined spatial boundaries. However, this not an accurate description in contemporary life. The spouse and children have rights that are not mentioned in the title but are protected by law. Nuisance law regulates considerably what the owner can do with his property. If it is mortgaged the mortgage company or bank has clear rights to the property. The most central right associated with property is the right to exclude yet current legislation limits the right of owners to exclude members of the public on an invidious basis such as race or cultural background. The social relation model is a better conceptual tool to address issues of access and use.
2. Landowners today forget that their title was gained at the expense of earlier titleholders under the Land Acts following the famine. Those earlier title- holders gained at the expense of the Norman and Gaelic chieftains who held land in trust for their clan. The purchase price paid by the lucky tenant farmers was discounted by a considerable percentage and payment was not immediate nor was it in cash. Tenant farmers, big winners under the Land Acts, benefited again from the operations of the Congested District Board and later Land Commission. The few landless labourers who survived the famine, got a meagre 3/4 acre for a county council cottage after a long campaign. Urban tenants got nothing. This illustrates the point made previously that property rights are not fixed but contingent and contextual. They have been amended in the past to respond to urgent social conditions and the time has come again to do so.
3. Until very recently the custom was to pass the farm to only one child in the family, usually a son. The dis-inheritance of the other children was necessary for farm viability but nevertheless represented loss to them. The remittances from the non-inheriting family emigrants were big factor in keeping the farmer on the land when times were hard. Therefore, the property in land farmers now enjoy was partly paid for by others within the community. The situation is no different today as 80% of farmer’s income comes from the check in the post paid for by taxpayers. The current Fischler Proposals entail ‘decoupling’ of farmer supports from agricultural production which recognises, under ‘modulation’, the other values and uses of farmland for which it is willing to pay. These uses include recreational use by the community, which infers recognition of a general public right to access. Without access to enjoy the Irelands wonderful landscapes and environmental bio-diversity the potential for rural enterprises based on catering for visitors will be irreparably damaged. Therefore, Feasta maintains that the general right of public access of non-cultivated farmland is underpinned by both the principles of common share and of common good.
4. Public access to land alone is not sufficient to deliver the common share; - it should also be reflected in a community land tax in common with all property in land. A notional land tax for farmers was floated in the 80s but vanished without proper consideration. It should be seriously considered again in the light of the high costs of collection and low returns of income tax and the high cost of farmland. High land costs prevent entry of new farmers with energy, imagination and appreciation of a rural lifestyle. Organic, low energy and diversified farming supplemented by other rural enterprises including renewable energy generation is the model showing most sustainability given the looming shortage of cheap oil. Both the traditional family farmer and the green ‘downshifter’ fit this model and both would be supported by an appropriate tax system based on the quality of the land. No further tax should be levied on the farming enterprise. This would favour genuinely efficient farmers with low external inputs and reduce the price of farmland (as described before in the case of housing) to allow new entrants and competition on an equal basis.
5. A community land tax would also provide a framework for a new legitimacy for EU payments to farmers in the event of complete ‘de-coupling’ from production. The community could see that it was getting a portion of the value of the payments with the farmer’s primary role changing from that of food producer to steward or custodian of the land on their behalf.
6. A community land tax on farmland would also provide a fair framework for restrictions on use under environmental conservation designations. Farmland comprising high scenic views and bio-diversity under use restrictions gives a lessor use value to the private owner but a higher use value to the community. Therefore the community land tax paid by the owner to the community should be substantially reduced if not relieved altogether. Under this scenario, farmers would actively care for the environment and some landowners might even campaign to have their area designated.

-End-

Pages 1   2   3   4