Use property tax money to tackle the housing crisis

Property taxes are something of a golden goose for the Scottish government. It is the tax which keeps on laying the golden eggs and 2024 was another record year. Land and Buildings Transaction Tax (LBTT) totalled £674.1 million over the last twelve months, which is 70.1 per cent higher than the pre-pandemic year of 2019 when £395.6m was collected.
 

In the last year alone, the revenue raised was £88.7m higher than 2023, when £585.4m was collected and five of the last six months of 2024 recorded the highest ever monthly figures for LBTT.
 

Of the £674.1m taxes raised, £202.0m was from the additional dwelling supplement (ADS) which is charged on second homes and properties purchased by landlords and property investors to rent. This represents 29.9 per cent of the total raised and is £39m higher than 2023 and the final three months of 2024 were the highest ever figures, with October to December all greater than £21m.
 

Almost all the residential taxes raised arose from properties sold for more than £325,001. The 18,280 transactions above this threshold raised £391.6m – 82.9 per cent of the total £472.1m collected in LBTT (this is the figure for residential sales with the ADS figures removed). This means that the average tax levied per transaction was £21,422.
 

But what to do with this revenue? The obvious solution – given that Scotland is in the middle of a housing emergency – is to ensure that every penny of this tax is ring fenced to be spent on new affordable and social housing.
 

Add this to the existing £595m in the affordable housing supply programme and there would begin to be real progress in easing the shortages which are causing the current emergency. With too few properties being built for homebuyers, not enough homes to rent in the private rented sector, and a prolonged lack of delivery in social housing this would be a clear sign that the Scottish Government was serious in addressing the long-term housing shortages in Scotland.
 

Ring fencing these taxes may even go some way to producing greater acceptance of the substantially higher property tax rates being charged in Scotland compared to England if people knew this money was guaranteed to be used to provide more affordable and social housing. With the ten per cent property tax beginning at £325,001 in Scotland compared to £925,001 in England there has to be some justification for this very unlevel playing field.

However, despite these greater taxes the Scottish property market remains as resilient and as buoyant as ever. Ultimately, with taxation at this level the long-term outlook may not be so positive but in the short term the Scottish property market remains remarkably lively. In particular the top end of the market is extremely strong.
 

Property taxes – whether it is LBTT in Scotland or Stamp Duty Land Tax (SDLT) in England remain a big earner for governments. But there must be a justification for the much greater charges in Scotland by ensuring that this money – and additional funds – are going – directly to easing the housing emergency. This would be a start in trying to provide homes for Scots and would be politically astute.