Higher-value homes should pay proportionally more council tax, a leading charity has said, with council tax bands changed accordingly.
Research carried out by the Joseph Rowntree Foundation revealed those living in a £320,000 house will typically pay only twice as much as those living in a £68,000 property, despite it being four times as valuable.
Changing the bands would help to keep house price inflation in check, the Foundation said in its Tackling Housing Market Volatility report.
Contentious: The charity believes it would help keep house price inflation in check, but others think it is unfair because poorer people whose property value has risen over time would be penalisedKathleen Kelly, from the charity, said: 'We need radical tax reform that would reduce volatility and offer a better deal to millions of households, while developing alternatives to ownership so people have access to stable tenancies in both the social and private rented sector.'
But local government minister Brandon Lewis said: 'The Government has already ruled out a council tax revaluation and has absolutely no intention of adopting the proposals in this report.
'A revaluation would mean soaring bills for millions of families and pensioners. In the 2005 council tax revaluation in Wales, four times as many homes moved up a band as down, and two-thirds of the tax hikes fell on low income families in the lowest band homes.
More... Summer home sales on even keel with prices steadier than expected but autumn should bring more activity, says RICS TABLES: Today's mortgage best buys TOP TOOL: How much can you afford to borrow?'In contrast to the last administration's approach, when council tax doubled, we've kept it frozen for the last two years.'
And John Hitchcox, London property entrepreneur and chairman of global residential firm yoo, said shaking up council tax to lower house prices will cause more problems than it will solve.
'I’m a big supporter of the Joseph Rowntree Foundation and the fantastic work that it carries out, however, there are conclusions here that just don’t add up,' said Hitchcox.
'Just because someone lives in a pricier property it doesn’t mean they’re necessarily richer. Over time, some homes have spiraled up in price quicker than others. Many older people for example, have invested in their homes over the years and now live on minimal pensions. Making such people pay more council tax because their properties have shot up in value would create more problems than it would solve.
Today’s RICS figures show house prices falling everywhere apart from in London, negating the need for manipulating prices via the tax system, he said.
'Despite what people think, the housing market is driven by the supply of credit,' he added. 'If mortgages are obtainable and affordable, then people will be able to buy, should they want to.
MORTGAGE HELPThis is Money offers a mortgage advice service with independent broker London & Country.To get some quick answers, call free now on 0800 073 9999 - or you can see today's best deals online: mortgage tables
'It’s fair to say that council tax valuations – tied to 1991 numbers – are out of date. But let’s not pretend Vince Cable’s national property tax is any great fix, because it’s not. We need to be encouraging mobility in the market and this will only be done by reducing stamp duty and cutting moving costs.'
The charity's report said the Government needs to increase the availability of social rented homes, while looking at introducing tougher rules which would give greater security to those renting in the private sector.
Mark Stephens, co-author of the report, said: 'Overall, the steps taken by the Government fall far short of the fundamental overhaul we desperately need to create a stable housing market.
'Tackling issues such as property taxation require political bravery and there is an important longer-term prize at stake: a more stable system that has a greater social benefit than the four boom and bust cycles we have experienced since the 1970s.
'But in some ways this progress report shows we are moving further away from a stable housing market.'