- Two-pronged tax proposal generates national media attention ahead of Autumn Budget;
- Muellbauer's policy would replace top two bands of council tax with an annual wealth tax of 0.5%, covering ~1.1 million properties in England and Wales;
- Agricultural and unoccupied land over £40,000 would be levied 1% tax under initiative;
- Britain's housing system 'distinctively dysfunctional' and needing reform, experts say.
A two-pronged policy proposal to reform Britain's property tax system put forward by Professor John Muellbauer has generated national attention and debate ahead of the Autumn Budget.
Housing reform, long-considered overdue in the UK, has been put back by successive governments. However Housing Expert John Muellbauer, who Co-Directs the Macroeconomics & Finance Programme at INET Oxford, believes economic and political circumstances have changed and that a property tax is now not only needed, but politically feasible.
Muellbauer's two-part solution to the fairer taxation of property, outlined in an Expert Comment for the University of Oxford, encompasses a reform of the most expensive Council Tax bands, as well as a land value tax on the most expensive land (including unoccupied land):
- Replacing the top two Council Tax bands, covering around 1.14mn properties in England and Wales, with an annual wealth tax of 0.5% of property value for UK taxpayers (and with a simple deferral scheme to protect cash-poor but asset-rich pensioners). This part of the two-pronged proposal could raise as much as £9bn.
- Introducing a land value tax, on the value of farm and forest land, and all unoccupied land such as land scheduled for development, at 1% on the excess of value above £40,000 per hectare. This part would raise at least £5bn pa, and probably more.
Supporting analysis is provided by an accompanying Working Paper, as well as a Q&A which addresses questions and comments from readers of the Financial Times.
"Together, these reforms could raise in excess of £14bn and relax budget constraints on the government, including on high priority infrastructure and social home building programmes" Professor Muellbauer said.
"They would also encourage a shift of resources away from rent-seeking and land speculation towards investment in more productive activities and assets."
Muellbauer's initiative in the press
Background: Britain's 'distinctively dysfunctional' housing system
A new compendium published in the Journal of British Academy 'Six provocations on the origins and impacts of the UK housing emergency' explains the origins of what Professor Muellbauer calls Britain's 'distinctively dysfunctional' housing system.
In six short essays, expert authors explain in plain language the origins and impacts of Britain's housing crisis:
- Historical antecedents. Martin Dawson describes the British housing system as it was a century or more ago. The expansion of owner occupation in the interwar period marked a major shift, including a decline in private rental and rise in council housing and public rental. This was the system that would be overturned in the 1970s by financial liberalisation and the 'right to buy' council houses.
- Financial roots of the British housing crisis. Avner Offer picks up this story, explaining how the Thatcher reforms of the 1980s ended the corset system whereby building societies dominated and brought banks into the mortgage market. By the end of the decade homeownership had acquired a political majority, making housing a 'wicked problem' with multiple stakeholders locked into a harmful status quo.
- Housing dynamics and housing futures in Britain. With the ONS predicting a 2.7 million population increase between 2024-2029, Michael Murphy projects the consequences for inequality of continuing housing policy inertia. With increasing housing supply coming into conflict with other high priority policy areas, achieving sustainable solutions needs long-term planning and collaboration across institutional and political divides.
- Housing and health in the older population. The UK has a higher proportion of pre-1946 housing stock than any other European country, with only 9% meeting 2018 accessibility standards - ill-suited for an ageing population. With barriers to downsizing inherent in the British system, Emily Grundy explains how unsuitable housing for the elderly is causing knock-on impacts in areas such as health and social care.
- Public opinion on housing in the United Kingdom. Ben Ansell explores the various ways in which ‘quixotic’ British public opinion has become a strong impediment to any housing reform. Homeowners becoming a 'super-majority' of the voting population has entrenched inaction.
- Holistic approaches to tackle the UK's housing crisis - and improve growth prospects. John Muellbauer proposes a comprehensive strategy to address the UK's housing crisis, including land value capture, increasing the construction of social housing, and implementing planning and property tax reform.
"Contrary to popular belief, there is no inherent conflict between reducing inequality and promoting economic growth. Well-designed property taxes can simultaneously broaden the tax base, stabilise the economy and enhance productivity" Professor Muellbauer said.
"Such policies would reduce intergenerational inequality, improving housing affordability, and support labour-market flexibility by encouraging mobility. Additionally these reforms could help address regional disparities and reduce greenhouse gas emissions by incentivising energy-efficient homes."
Professor Muellbauer will deliver The British Academy Lecture on Housing, land and the British Economy, on Wednesday 19 November 2025 at the University of Bristol.
