Of course it does, not having to pay rent or a mortgage allows you to spend the money you have on other things, it fixes your cost base so you dont run the risk of the landlord putting up your rent or the bank increasing your mortgage repayment.
The value of an asset is really down to how much enjoyment the owner gets out of it. If you like your home, you feel at ease, feel secure then surely that is money well spent. If you were just buying the property as an asset to make money then its a different argument.
As for the benefit to the economy and dead money, well if we go down that route, we might as well all just get paid an allowance and all the money go in a central pot. Nobody have any saving, etc. How does that work out in the long run, looking at the nearest equivalents to that approach you end up with an even smaller concentration of wealthy individuals holding all the power. No middle class, no upward progression etc, just a wealthy elite and everyone else.
This isnt a question of not paying tax, tax is what funds our public services, the more people working and paying tax the better. Everyone paying more income tax in exchange for better public services is something I have been an advocate of and posted about on this thread multiple times.
We all go on about tax in Scandinavian and how good their services are, workers on the basic rate of income tax in Sweden pay 32.4% (including the municipal tax), higher rate they pay 52%, VAT is charged at 25%, yet they have no wealth or inheritance tax. You pay more tax if you live near a major city, and less if you live out in the countryside, because quite sensibly, you benefit more from the services on offer living near a city. The tax free allowance is also much smaller being a minimum of around £1400 for higher earners to around £3600 for those earning around £25k with it tapering on both sides of this figure. If you're over 66 a bigger allowance of around £13k tax free.
For comparison the basic marginal tax rate is 28% (Income tax plus NI) and the higher rate is 42%, with the additional rate being as much as 60% due to the removal of the tax free allowance, with VAT at 20%. What that says to me is that if we want Swedish levels of healthcare, both basic and higher rate earners need to pay more and we need to up VAT (which I know is a regressive tax if you dont do it selectively).
Personally if tax has been paid on it already and its been subject to IHT as well, then 2 bites of the cherry is sufficient to say that someone has paid their fair share on anything left to their kids. If tax loop holes are allowed to exist then they should be closed for everyone, but for some reason they are allowed to continue to exist, but increasingly only for a smaller and wealthier echelon of society.