Snapshots - AI. A Cautionary Tale, Mansion Tax and New Tech in Old Buildings

AI. A CAUTIONARY TALE

AI is now insinuating itself into all our lives and is putting tools that were previously unavailable into the hands of ordinary people. What’s not to like?

We had an incident recently in a conveyance with which we were involved. Our clients decided to put the searches into an AI and received dozens of warnings that hadn’t been flagged by their solicitor. One was the presence of dangerous buried waste nearby and another the likelihood of a block of flats being built on a different site. Worrying stuff - until it turned out the waste site was a church graveyard and the block of flats was a potential (only potential) infill site in a small village.

This turned out to be amusing as we were on hand to unpick the AI slop. Where it’s not so funny is when agencies that undertake searches on behalf of solicitors come up with similar rubbish - because it has a veneer of professionalism and it’s one removed from our ability to sweep up the mess. It’s resulted in deals falling through, mortgages refused and insurance premiums becoming inflated.

Even more jeopardy lies in asking AI to value a property. Take a hypothetical example. A buyer considering a £6million house in The Cotswolds asks an AI platform whether the asking price is justified. The answer comes back confidently: the property looks expensive against three nearby homes, all apparently supporting a lower price per square foot. On closer inspection, one of those ‘comparables’ turns out to be an asking price rather than a completed sale, another required complete refurbishment, and the third sits on a busy road. Meanwhile, the genuinely relevant transaction, a similar house which sold privately only two streets away, never appeared on any AI searchable material at all.

What should be helpful (and, of course, sometimes it is) is often anything but.

Caveat emptor.

MANSION TAX

Here it is again: the Mansion Tax. It’s been on the Labour agenda for years, but it looks as if it’s now going to happen in 2028, under the official name of the High Value Council Tax Surcharge. The Mansion Tax (for this is surely what it will be called) is going to be charged annually on top of the existing council tax in tranches: £2m t0 £2.5m at £2500 pa, £2.5m to £3.5m at £3500 pa, £3.5m to £5m at £5000 pa and above £5m at £7500 pa. The money will go directly to the Treasury (not the local council) and will rise with CPI.

Something like this was always likely to happen given the obvious anomalies in the council tax system - most evident in Westminster where the highest band H is £2095 pa for a serious ‘mansion’. Band H in Middlesborough, which has become the poster boy for urban decay in the UK, is £5o96 pa. All these are based on values in 1991, since when property prices have changed somewhat. It’s a mess, and everyone knows it’s a mess, but a revaluation of every house and flat in the country is going to take time (lots of it) and money (lots of it). A Mansion Tax would appear to be a simpler way to get more money out of high value houses.

How much? The OBR reckon it’s going to be about £400m in the first year rising to £435m by 2031. However. they also estimate that the reduced Stamp Duty, Inheritance Tax and Capital Gains Tax in the run up to its introduction will cause revenue to fall by £370m. So this is not even going to scratch a £13o billion deficit even if this was an easy tax to collect - which it certainly won’t be. The Treasury is already recruiting an army of valuers who are going to have to go into houses and assess how much value has been added by, say, a new bathroom or fancy paint job. Even if they can do this well (the record of government projects is not promising) then a large percentage will end up at appeal. The OBR reckon that about 20% will appeal with a 40% success rate.

So, with valuations, appeals, inspections and tribunals, this promises to be a lot of sound and fury signifying not very much in the larger scheme of the fiscal mess we are already in. It sounds good, if you are a class warrior or one of the new valuers who will enjoy a public sector pension, but not if you want a simple and easy to collect tax that is going to make a difference. How will it affect house prices? Probably not very much - the sums are not huge. But it just adds to the perception of the UK as hostile to wealth, bound in red tape and incoherently governed. Not a good look for so little benefit.

NEW TECH IN OLD BUILDINGS

Anyone who lives in a listed building (or a conservation area) knows how difficult it is to get permission for anything like air conditioning, double glazing or a heat pump. The intention is laudable - to keep as much of the original building as possible - but this is often in conflict with today’s need to be energy efficient. Also, logically, if you want the original building, you should take it back to when it was built - which would now exclude internal sanitation and central heating and include coal fires in central London.

Something had to give and it has. In August the government produced an update to the National Planning Policy Framework, the document that guides council decision-makers. Local authorities are being told to consider important public benefits such as energy efficiency and low carbon improvements when considering applications. “Substantial weight’ is to be given to energy efficient proposals.

So far, so good - but the niggle is the word guide. It doesn’t oblige the councils to do anything and the power still lies with the councils and conservation officers who very often have their own agendas. It will probably take a few appeals, costing the local authority a good deal of money, before precedents are set that become national.

Why this should be such an issue when modern double glazing is almost indistinguishable from the original, any owners of a listed house are highly unlikely to put an air source heat-pump on prominent display and climate change is such a pressing issue, is hard to fathom. But better late than never.