Any other business

A windfall tax on monster basements could solve London’s housing problem

31 August 2013

9:00 AM

31 August 2013

9:00 AM

The mega-rich are best housed behind high fences, on wooded estates patrolled by dogs; that way, they don’t have to annoy the rest of us. But I can see how irritating it must be, if you live in the crowded Ladbroke Grove area of west London, to have a neighbour like Reade Griffith, an American hedge-fund manager who has received planning permission for a vast basement extension to his house that will take many months to excavate. Fellow residents of Kensington and Chelsea, other than those wealthy enough to have similar schemes in mind, will probably think it serves him right that he has been charged an £825,000 ‘Section 106’ levy (a device usually applied to large commercial developments) to contribute to ‘affordable housing’ developments in the royal borough. Indeed — leaving any whiff of envy aside — his story may contain the germ of a solution to Britain’s growing shortage of cheaper homes for working people.

A report by the Centrepoint charity last month predicted a shortfall of more than 900,000 affordable homes in England by 2021, with 190,000 of them needed in London. Housebuilding of all kinds stalled during the financial crisis, falling far below levels needed to meet demand at the lower end of the price and rental range. Developers who are now back on site will do their utmost to wriggle out of obligations to provide a proportion of affordable units within each new scheme. Meanwhile, a proposal by the Future Homes Commission (sponsored by the Royal Institute of British Architects) for an ambitious programme of social housing funded by local authority pension funds seems to have fallen on stony ground.

So why not invite our new rich neighbours to do their bit for the community? I’m dead against the Lib Dems’ mansion tax proposal, which would confiscate savings from long-term homeowners or even force them to sell; but I wrote once before that ‘foreign owners of empty mansions deserve to be taxed till the bricks squeak’ and let me now elaborate. This would apply only to those who buy multimillion-pound homes, or who increase their value by adding extensions as big as Mr Griffith’s — and who are non-domiciled or not paying UK tax at all. In addition to 7 per cent stamp duty (which has done nothing to calm top-end prices since it was raised from 5 per cent in the 2012 Budget), they would either pay a simple levy or hand over a larger sum to buy an ‘affordable housing bond’, offering a modest rate of interest and redeemable after, say, 15 years — as good as a gilt-edged stock, in fact.

The aim would be that each expensive house sale should fund the building of at least one affordable flat. The levy would take some of the hot air out of an impending bubble, and foreigners who see London as a safe haven for their wealth would be as welcome as they always have been but would be obliged to mark their arrival and their good fortune by making a useful social contribution. I call that a win-win proposal.

Here we go again

An early exponent of the massive basement dig as a badge of being so cash-rich you just can’t think how else to spend it was Jon Hunt, founder of Foxtons estate agency, who embarked on building a private museum for his collection of Ferraris beneath the garden of his £15 million mansion in Kensington Palace Gardens. Famed in earlier days for its aggressive sales techniques, Foxtons has long been a leading indicator of London’s boom-and-bust real estate scene. Hunt started the firm in 1981, hung on through the slump of the early 1990s and sold out for more than £300 million to a private equity group, BC Partners, at the peak of the market in May 2007. ‘Only a clown would argue that Foxtons is worth what BC paid for it’ said The Spectator at the time, and sure enough revenues and profits collapsed as soon as the credit crunch hit.

A restructuring followed which gave much of the equity to Foxtons’ bankers in return for huge debt write-offs — but last year BC bought the banks out, and now the business is reported to be heading for
flotation at a valuation of ‘up to £500 -million’, a fat slice of which will go to its managers. There could hardly be a clearer indication that prime London property is about to overheat again; all the more reason to consider my affordable housing wheeze.

The full fiscal bowl

I’m still enjoying my annual sojourn in France, but sorry to report that the Parti Socialiste forgot to invite me to its summer school at La Rochelle, where ministers and party bosses gathered last weekend to discuss ‘le ras-le-bol fiscal’ — the feeling that voters have had more than a full bowl of François Hollande’s tax hikes, which include a 75 per cent top rate of income tax. The meeting coincided with a warning from EU economic and monetary affairs commissioner Olli Rehn that the French tax burden (third highest in the OECD behind Denmark and Sweden, and set to rise again in 2014) has already reached a ‘critical level’ which is impeding growth, and that public spending cuts should henceforth be Hollande’s priority. Underlining his point, France’s jobless total rose again in July, to 3.3 million. Even Ségolène Royale, queen of the left and mother of Hollande’s children, has been talking about a ‘moratorium’ on tax rises that might damage spending power. But the government’s response was to shun Rehn’s warning and announce a new carbon tax, to the joy of French green activists enjoying their own summer get-together at Marseilles.

I wasn’t asked to that one either — but nevertheless I think it would be gracious of me to invite all these misguided ideologues to join me on Saturday night for the last marché gourmand nocturne of the summer in my Dordogne village of St Pompon: a thriving model of small-scale free enterprise, community cohesion, minimal red tape and making the most of your natural advantages, it’s the lesson they need in how to maximise potential for economic recovery.

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