How much do we have to work just to pay to access our own land?

The average home owner in the UK will work for nearly 7 years (or 1/7 of their working life) while the average renter will work for 13 years (or 1/4 of their working life), just to pay for the land they inhabit.

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That represents as much as 14% and 25% respectively of their entire working lives spent to pay for something which should be theirs as of right.

How do we reach these figures?

The average home in the UK currently costs £188,ooo, but how much does the land on its own cost? There are various ways to calculate this – you could multiply the average size of a UK home at 76 square meters by the average build costs of around £1,500 per square metre, which would give you a cost for the building of £114,000. This could then be subtracted from the total to give you a cost for the land of £74,000. It suggests that about 40% of the price of a home in the UK is actually the cost of the land on which it sits.

I accept that this is quite a crude way to estimate the cost of the land, so if anyone can think of a better yardstick against which to measure it, I’d love to hear your suggestions.

So, given that, we then need to work what a loan for that amount would cost somebody. Of course, a person could buy that land outright, but this rarely happens with owner-occupiers, and certainly not in the case of people beginning their home-owning life.(it does happen more for older buyers and those who have made a large profit on previous home/land ownership, but this exercise is about estimating the total cost of the land from the beginning).

Of course, the cost of the loan will depend on the rate of interest charged and the duration of the loan, but if we assume that they conform to the long term average of 5% and the normal duration of 25 years, the total cost to the buyer of the land would be £131,262 (according to this mortgage calculator)

So we have a final figure for the cost of just over £130,000.

Now we need to figure out what that means to the average earner in the UK. According to the Office of National Statistcs the average UK worker earns £27,450 per year. After income tax and Employees’ National Insurance, this becomes a take-home pay of £21,750. The average adult in the UK also pays around £520 in Council Tax and around £2,200 in VAT (this is just the total amount raised in Council Tax  and VAT divided by the number of adults in the UK ) , which brings take-home pay down to just over £19,000.

And that gives us an annual disposable income for the average worker of £19,000

Which would mean that the average worker has to work 6.8 years simply to pay for the use of the land they inhabit. Assuming a working life of 50 years, this accounts for nearly 14% (or one seventh) of their time working. Some religions require you to dedicate 1 day a week of your time to God, but did we realise we were dedicating a whole other day to landowners??

And that assumes the person owns their own land after that time and therefore faces no further costs.

The situation for renters

What if they never own the land they live on, but spend a lifetime renting it instead?

If we apply the same figure as as above  to renting, 60% of your rent will be for the building you inhabit, 40% will be for the land. The rent on the average property in the UK is around £9400 per year (it varies for England & Wales, Scotland and Northern Ireland so this figure is a weighted average), so the land portion (40%) of that is £3760 per year.

Assuming a life expectancy of 81 (the UK average), that means that across 66 years of adult life in the UK, the average renter will pay an incredible £248,000 to access the land they live on (around £118,000 more than the person who buys their land). This equates to 13 years of the average worker’s disposable income, or 26% of their working life.

This adds up to a huge drain on human productivity simply to pay landowners in return for use of land which rightfully belongs to all of us.

Now imagine if, instead of paying to gain access to the Land, we were all paid a dividend by those who profited from land.

Under the Transformation deal a Land Value Tax would be levied on the owners of land to compensate others for their private enjoyment of a public asset. This would be paid in the form of a Basic Income to every citizen, who instead of being financially hampered by the financial demands of landowners, would benefit financially from the value of that land.

At the levels suggested here, over the 66 years of adult life, each individual would receive just over £348,000, which would more than compensate those who currently have to devote much of their working life simply to live on the land.

Instead of being impoverished and held back by the cost of accessing land, we could be liberated by sharing its value equally across all citizens.

All it takes is an acceptance that the land is owned by all of us. It is a natural resource that should be equally shared among all citizens, and those who seek to use it for private purposes should pay everyone else for this privilege.

 

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