In the news, the latest round up
In the news this week plans for a mansion tax are revealed, how families in the North are facing larger council tax bills and the leaseholders that are facing staggering bills.
February 19, 2020
Tories eye mansion tax and raid on pension – The Telegraph
Boris Johnson has been weighing up shock plans to impose a “mansion tax” on owners of expensive homes, in a move which will infuriate the Conservative Party’s grassroots and stun MPs.
Severe cuts to pension tax relief enjoyed by millions of voters are also being considered by the Prime Minister and his Chancellor, Sajid Javid, for the Budget next month in an effort to pay for a huge increase in public spending.
Some Treasury officials are understood to be keen on introducing what has been described as a “recurring” wealth tax that would primarily affect London and the South East, possibly as a quid pro quo for cutting stamp duty.
It is not clear exactly what form the tax would take if it were included in the March 11 Budget, but options range from a levy – first mooted by Ed Miliband, the former Labour leader – to an additional higher band of council tax.
Families in the north have biggest council tax bills – The Times
Boris Johnson is facing calls to overhaul council tax after research found that homeowners in the north pay up to 30 times more than those in the south relative to the value of their property.
Analysis by The Times has found that 80 per cent of the most expensive Band D council tax rates are in the north or Midlands, while 84 per cent of the cheapest are in London and the southeast. There are no northern towns or cities in the cheapest 25 areas and only two in the Midlands.
On average, residents in the 25 boroughs with the most expensive Band D rates pay £9 for every £1,000 of property value, whereas residents in the cheapest 25 areas pay £1.91 per £1,000, almost five times less.
The rate of council tax depends on the value band. Band A is the cheapest, Band H the costliest. Properties were last valued in 1991, with assessments based on size, layout, character and location. An average three-bed home is likely to be in Band D.
This week the deputy leader of North Yorkshire council said there was “revolution” in the air as residents in his area face bills three times higher than some in London’s most exclusive boroughs. “We’re now at a tipping point of acceptability over council tax,” warned Gareth Dadd, as he announced his area’s bills would have to rise by a further 4 per cent, twice the rate of inflation, to cover the rising cost of adult social care.
Find out if you’re eligible to get a council tax discount in 2020.
Leaseholders facing ‘staggering’ bills for ex-council flats – The Guardian
The risk of buying ex-local authority property has been laid bare by a leaseholder who claims she has had to pay more than £24,000 for a new heating system and £2,000 to have her door painted.
Artist Michelle Baharier has lived on the Gilesmead estate in Camberwell, south London since 1993, first as a council tenant, then as a leaseholder since purchasing her flat through right to buy in 2008. Southwark council owns the freehold to the estate of 40 flats, 29 of which are owned by leaseholders.
Since owning the property, the 56-year-old has been on the receiving end of “eye-watering” bills for maintenance to the building.
She says her two-bedroom flat originally lacked adequate heating. In 2014, after a series of surveys and consultations with leaseholders, the council installed a communal heating and hot water system at a cost of close to £1m, saying it would last 25 years. Each flat was billed £24,486. But Baharier claims that installing an individual heating system in each flat would have cost just £4,000 per property. Baharier took her case to the first tier tribunal which ruled that she didn’t have to pay the money.
Southwark council appealed, and the upper tribunal ruled in its favour saying: “It is unrealistic to suggest that the parties entering into the lease intended the building to remain unchanged throughout the term.” Baharier was required to pay the money, plus court fees and interest, bringing the total to about £32,000. She says the new heating system regularly breaks down with leaseholders footing the bill, which the council denies.
Sebastian O’Kelly of the Leasehold Knowledge Partnership says he gets three or four queries a week from leaseholders facing huge bills for major works, with most bills in the region of £15,000 to £25,000.
It may seem like technical legal language, but there are few things more important about your home than whether it is freehold or leasehold. It makes the difference between owning your own home outright, and having a landlord. Find out more in our guide to leasehold vs freehold.
Equity release turns on the money tap – at a high price – The Times
Almost £4bn was taken out of property in Britain last year using equity release, figures from the Equity Release Council show.
However, that’s just a drop in the ocean compared to the UK’s total residential property wealth, which, according to the Office for National Statistics, stands at £8 trillion. That means the market is likely to grow — especially as the average interest rate on equity release products has dropped to a low of 4.9%.
By far the most prominent equity release product available today is the lifetime mortgage. This involves the lender handing a percentage of the value of your property over to you. Typically, people do not make repayments on this loan (although you can). Instead, it is repaid from the sale of your property when you die or go into care. As you don’t make any repayments, the interest rolls up over time.
With equity release, the debt typically doubles every 14 years. So, if you borrow £50,000, 14 years later you will owe £100,000, and after 28 years it will be £200,000.The rates of most equity release loans are fixed for life. It is possible to remortgage to a cheaper deal, but this involves charges.
A better solution may be to make payments that at least pay off a portion of the interest, which some recent lifetime mortgage products do allow. This reduces the growth of your debt.
Equity release schemes can be a sensible and practical way of releasing cash from your home if you are over 55. But it’s a big step so read our guide to help understand whether it’s right for you.
Discounted housing scheme out of reach of most first-time buyers – The Guardian
A high-profile housing scheme offering first-time buyers discounted homes will be unaffordable to the vast majority of workers on average or low incomes, it has emerged.
The First Homes scheme has been described by ministers as “genuinely life-changing for people all over the country”. However, new analysis suggests it will be out of the reach of average earners in 96% of England. The fresh concerns follow claims that the scheme will exacerbate the housing crisis by cutting the amount of scarce, more affordable social housing.
The scheme, which would see successful applicants given 30% off new-build homes, is aimed at military veterans and key workers such as nurses, police officers and firefighters, who will be given priority access to the properties.
But research by the charity Shelter found that, in almost all parts of England, someone on an average salary or lower could not afford to buy one of these new-build homes. It also shows that almost two-thirds (63%) of private renters in England have no savings at all for a deposit. New-build properties in England cost £314,000 on average. A 30% discount would offer a saving of £94,000, but would still require a significant deposit.
Writing for the Observer online, Polly Neate, chief executive of Shelter, warned the scheme was “a comfort blanket only, providing nothing for the people at the sharp end of the national emergency our housing crisis has become.
“At a time when we desperately need properly affordable housing, policymakers are looking to give a lucky few a 30% discount on what are still going to be incredibly expensive homes. And let’s be clear about who the lucky few are. Not those facing a monthly struggle to afford their rent.
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