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Developer B
Developer A
(image courtesy of Shelter)
SHOULD NOT BE CONFLATED WITH NEED
Demand for homeownership is a function of:
Landowners have little incentive to sell at affordable prices.
Tenure favouritism
The scope for making windfall gains from changes in the value of land
and how it has given birth to the British 'obsession' with homeownership
Increase CGT for properties held for short-term speculation
Land without planning: £9,000 per acre
Land with planning: £500,000 (Birmingham)
£1.7 million (London)
It pays for developers to focus on land trading and adding value through the planning system rather than the actual business of building houses.
Lack of competition and diversity in the building sector
End excessive and risky mortgage lending through e.g. LTV and LTI limits
Remove the subsidies and tax breaks for BTL landlords and clamp down on tax avoidance
Why the state needs to get building again
Rising inequality and slowing growth
House building by sector since WWII (England and Wales)
The expectation of further price rises
Tax empty homes and second homes
Why it pays to drip feed supply
NB. Residential land prices largely determined by house prices
Inequality in housing in the UK – measured by rooms per person – is at its highest level since 1901 (Tunstall 2014)
Between 2001-2011, the number of properties in England and Wales recorded as having “no usual resident” (includes both vacant and second homes) increased by 185,000 (a 21% increase).
For comparison, just 203,000 homes were built by housing associations and councils over the same period.
It appears that most of this increase was due to the rise of second home ownership: there was a 55% increase in number of English households with at least one second home in England between 1996/97 and 2012/13 (EHS)
turns homes into financial asset
Evidence:
Dearth of opportunity for profitable investment in the productive economy (see e.g. Martin Wolf, Wolfgang Streeck, John Bellamy Foster)
Source: Maito (2014)
Britain’s housing market the fourth-most attractive destination in the world for foreign investors looking to put their money into residential property assets (2015, Savills)
Concentrated in London's 'prime' market: Seven out of 10 London houses sold for £5 million or more go to foreigners.
Between 2001-2011, the number of properties in England and Wales recorded as having “no usual resident” (includes both vacant and second homes) increased by 185,000 (a 21% increase).
For for every eight houses built during that period, one house fell empty.
The growth of Buy To Let is even greater...
Buy To Let Landlords
Scrap bedroom tax and other housing benefit cuts/caps
Ban the ownership of property by non-UK based entities and offshore trusts/companies.
and why the balance of power is in their favour
Easy mortgage credit
and why it has been so plentiful
In the last 10 years, the total value of landlord mortgages has tripled from £65 billion to £200 billion.
Private landlords now own getting on for one-fifth of the nation’s housing stock.
BTL landlords have benefited from:
New mortgages advanced for house purchase by LTI
Average interest rates on outstanding mortgages
Rebalance the economy away from London
UK house prices divided by average full time earnings since 1930
Scrap the Affordable Rents regime
Rent controls, better security of tenure, etc, in PRS
Why has lending not dried up post-2008?
Drop in Bank of England interest rate
BTL lending unaffected by new affordability tests
and Starter Homes
40% increase in lending to BTL since crash, compared to 2% increase in owner occupier lending
Sources: ONS House Price Index, March 2014, Table 22. Average full time earnings - http://www.measuringworth.com/ukearncpi/.
Reform council tax & business rates as step toward LVT
In 2013 the social housing waiting list stood at around 1.7 million households (a 65% increase since 1997).
Build more retirement homes to help free up family-sized dwellings
National Clearing House for Homes ?
(and financial sector in particular)
Encourage under-occupiers to rent a room to a lodger
Introduce a first 'Right to Refuse' in PRS
Economy
increasingly vulnerable to a fall in house prices
Decimation of the social housing stock
Increasing numbers unable to get onto housing ladder
(to make market operate more fairly, efficiently and transparently, but also provide a powerful lever for acquiring homes for affordabe housing)
- Right to Buy
- Transfer to Housing Associations
- Lack of new building
Abolish/curtail Right To Buy
Introduce a Right to 'Sell and Stay' /
expanded Mortgage Rescue Scheme
Encourage a diversity of suppliers: intervene to create a level playing field
When the bubble bursts the
Halt the fire sale of public land (and loosening of Section 106 requirements)
state bails out the Too-Big-To-Fail banks
Rent hikes in the Private Rented Sector
e.g. improve transparency around land holdings
Real equivalised mean weekly housing costs by tenure type, £ (GB)
i.e. the tax payer takes on the private debt of the banks
(made possible by the disantling of rent controls and tenants rights in the 1980s)
Lift caps on Local Authority borrowing and provide grant funding again for social housing
Use tax incentives or compulsory purchase to bring undeveloped land into use
This is one way to help households out of negative negative equity and prevent a small fall in prices turning into precipitous crash
instead transfer land to local councils or lease to community providers and non-profits
Government uses the new mountain of public debt to justify welfare cuts...
Even though
public debt is
relatively small compared to household and financial debt
Revive New Town Development Corporation model
Rising housing benefit bill
Set up National Housing and Infrastructure Bank
benefits cap and cuts to housing benefit, etc
This policy might be designed to ensure that a sudden sale of BTL properties doesn't end in crisis - either for tenants or macroeconomy
Government imposes austerity
The government pays over £9 billion per year to private landlords in housing benefit.
with structural change to how land is released
Source: Outturn and forecast: Budget 2014, Department for Work & Pensions
Support alternative models of ownership like mutuals, coops and Community Land Trusts