Far from viewing these excess holdings as incurring undue costs, people generally view it as a cast investment with a tax-free return.
What could be done about it? You might well think that the special tax privileges attached to owner occupation should be reduced or even abolished. Whether it is justified or not, politically, it is a total failure.
An alternative would be to increase property taxes, or even to introduce a wealth tax. But these measures would also meet enormous opposition and each has its own difficulties and drawbacks.
One possible solution is to use the tax system to encourage people to downsize as they age. Underemployment is a feature of all age groups, but senior-headed households are much more likely to be under-occupied.
In England, 55% of households headed by a person aged 65 and over have at least two spare bedrooms. And there are about seven million of these households, more than a quarter of the total.
Let’s be clear, there is no sense in which these people are not allowed to stay in these houses or that they should in any case be penalized in order to get them to move. But they could be encouraged to do so, whereas the current system encourages them not to.
One problem they face if they downsize is that they have to pay stamp duty on their new, smaller property. This is another example of what bad tax stamp duty is. Ideally, it should be abolished. But, failing that, a political option is to exempt the downsizers. This would counterbalance the incentives for first-time buyers with a new concession for the last sellers.