What the history of property taxation can teach us about the future

Government interference always gets a reaction. It’s inevitable, regardless of what industry or market we’re talking about. The immediate reactions themselves though are generally predictable.

They’ll fall into one of two categories.

There are those who will immediately lament more interference from the nanny state. Participants will wonder why legislators and regulators can’t just leave them alone to get on with it. Interfering will only make things worse.

Then there are those who clammer for reform. Said industry, they argue, just isn’t working. Stakeholders are being taken advantage of. Greedy so-and-sos are profiteering. They're doing little to actually support the market or their customers. The powers that be must step in to change things.

These reactions are as regular as clockwork. You can almost call the headlines, word for word.

But, what I think is more interesting is how markets adapt to changing landscapes. This is where trying to predict what’s coming is tricky.

One recent news story got me thinking about this. As The Telegraph reported: “Michael Gove has ordered officials to review new health and safety regulations that are shrinking the size of windows to stop people falling out.

Rules for new build homes mean that upstairs windows should be at least 1.1 metres (3.6ft) from the floor, but critics say homes will be darker and less attractive.

The regulations were introduced over fears that hotter summers brought on by global warming will lead to people opening their windows more frequently, putting them at risk of falling out.

But the Levelling Up Secretary has now instructed policymakers to look again at the regulations.”

Despite what your initial thoughts may be to this news, there’s historical precedence here. The government needs to be weary when it comes to windows. A historical piece of window-related legislation proved so dramatic, it affected our very language.

Ever wonder where certain phrases come from?

In 1696, we owed money to the Dutch. But after a disastrous effort taxing hearths, the government needed a new source of revenue. So, the Duty on Houses, Light and Windows was introduced. Otherwise known as the window tax.

Generally, the more windows a person had, the wealthier they were believed to be. Hence, they were fair game for taxation.

Eventually, people started blocking up their windows to avoid the tax. As the levy became even more expensive, homes started to get built with windows already bricked up. Apartment buildings were constructed with entire floors of windowless bedrooms.

By 1746, a glass tax was also introduced, placing more pressure on households and the design of buildings. Unfortunately, damp and windowless dwellings led to disease. Smallpox and cholera spread across the nation.

It wasn’t until 1850 that a motion was put forward to repeal the window tax in Parliament. As the legend goes, MPs debating the issue passionately yelled “daylight robbery!” throughout the proceedings.

That idiom has been with us ever since. You can also see the physical scars of this tax today in places like Bath, where you’ll find buildings with bricked-up windows still standing.

So, what other seemingly insignificant changes could be on the way that may have long-lasting, unintended consequences?

What else could force adaptation in the property market – for better or worse?

Gas hobs – a danger to our health?

Gas cookers have come under the spotlight in recent weeks. Many have called on the government to help families transition to cleaner alternatives. You may think nothing of simmering your Bolognese over your hob for a few hours, but doing so could be damaging.

Over 36 million people in the UK cook with gas appliances. These people may be exposing themselves to levels of indoor air pollution that violate UK outdoor air pollution regulations, according to the Collaborative Labelling and Appliance Standards Program (CLASP).

It’s estimated this indoor air pollution from gas cooking costs the UK around ￡1.4bn annually in healthcare costs. Which includes lower life expectancy, more illnesses, greater healthcare expenditure, and lower productivity.

Gas hobs are already a hot topic issue in the US. It may only be a matter of time until we see more of the same on this side of the Atlantic. In fact, gas hobs could be banned in new homes from 2025.

What kind of reactions could we see within the property world? There are the more obvious potential outcomes. Perhaps tenants will only want to rent properties with electric induction hobs. Maybe houses will be sold on the condition that kitchens are completely refurbished.

But what if we get more extreme reactions? Could home chefs revolt? Many swear by cooking over fire, which they say can’t be replicated. It’s an ancient practice that might as well be part of our DNA.

Will this passion result in people abandoning indoor cooking entirely? If we can’t generate real flames in our kitchens, will some of us take to cooking outside more often? If so, what will this do for our carbon footprint? Charcoal isn’t so great for the environment either.

It may be unlikely, but it’s still a possibility. Less ‘daylight robbery’, more ‘gas flame thievery’.

Heat pump installations are going well…

Heat pump changes are a more immediate concern for many. The government is so keen for change, that it’s willing to issue ￡5,000 grants to help households make the switch.

Famously though, these efforts aren’t going well. We’re way off track. Yearly, 30,000 grants are meant to be delivered in England and Wales. Only half of that was issued in the scheme’s first year.

But even if we did hit the 30,000 mark, the funding probably wouldn’t stretch very far. It can cost up to ￡30,000 to install a new heat pump. Nearly 70% of people living in off-grid rural homes wouldn’t be able to afford this, according to a recent survey.

These are worrying figures, considering the government’s plan to ban new boiler installations from 2026. And all of this is before we consider insurance problems that are starting to come to light.

If these issues persist, and the government refuses to budge on its eco-friendly commitments, what will this mean for homeowners who can’t afford to upgrade? Could they turn to the state for more support in the winter months?

What about the effect on supply and demand itself? Existing homeowners may deem upgrading their properties to no longer be worth it. If we see a wave of homeowners downsizing to greener newbuilds, what will this mean for first-time buyers?

If there’s less supply for this struggling cohort, we may struggle with other long-term problems. If you can’t afford a decent home, there may be delays to marrying, having children, or contributing to a pension.

Leasehold reform – another historic headache

While the prospect of completely abolishing the leasehold system has been rowed back, we may yet see caps on ground rents. There could also be more powers introduced for tenants to choose their own property management companies, along with a ban on building owners forcing leaseholders to pay any legal costs incurred as part of a dispute.

There’s one obvious, unavoidable issue here – cladding. Costly repair burdens will fall on the shoulders of landlords.

This could result in a huge collective bill. As a reminder of how widespread this issue is – the government recently revealed the number of buildings with non-aluminium composite material flammable cladding could be 11,700. Of those, 1,700 could be of high risk.

The cladding scandal needs to be addressed. There’s no avoiding that. But landlords are stretched as it is. If they must fork out to replace existing cladding or other design features, will the costs inevitably be passed on to tenants? Will renters in turn call for more support or tougher legislation?

And on, and on, and on.

There’s no way of truly knowing how decisions made today will affect us tomorrow. And while you may think some of the outcomes I’ve covered sound a tad farfetched, so too does the idea of homeowners boarding up their windows to avoid a tax. But it happened.

The only thing we can know with some certainty is that adaptation, and flexibility is needed in the market on a regular basis. You’ll likely need to respond to a new piece of legislation, or sudden shift in demand at some point in your investment journey. As always, we’ll be there with adaptable, flexible finance to help you through the unexpected.