ABSTRACT
The British system of housing finance is a wonderfully grotesque monster whose anatomy perplexes even those who spend their lives in its study. Households pay a proportion of their income to the state through taxation. At the same time these taxes, with the other forms of state income, are the source of housing subsidies. The main subsidy to owner-occupiers is tax relief on mortgage interest payments, a transaction between the state and the house owner. With respect to new dwelling production the answer is that under the existing social order the municipalities must raise loans from the market in order to pay their contractors’ bills. Similarly the building societies rely on the inflow of deposits to provide mortgages to those who borrow from them. Government accounting practices always draw a distinction between expenditures on capital account and those on revenue account.
