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Opinion: Heading off a homes crisis

Housing sector experts are suggesting practical measures to counter decades of incoherent policies — if only the Government would listen

Whitehouse-Phil

It is a remarkable indictment of Theresa May’s tenure as prime minister that the least memorable thing about her speech at last year’s Conservative Party conference was the content itself.

Yet, amid the ensuing media frenzy over what health secretary Jeremy Hunt later described as “one of the most famous coughs in history” lay some key initiatives, not least the £2bn pledged towards building 25,000 additional council houses within the next five years.

What is more, in the weeks leading up to the November Budget, May re-asserted her determination to take “personal control” of solving Britain’s worsening housing crisis and of her “mission to build the homes the country needs”. But with experts warning of the need to build at least 300,000 each year just to keep pace with demand, is she doing enough?

Long-standing issues

The failure of successive governments to build homes at a required level lies at the root of the crisis, especially in the years following the 1980 Housing Act and the right-to-buy revolution.

Theresa MayHowever, the publication of the White Paper on housing early last year marked a reversal in thinking, with ministers accepting that 250,000 homes would be needed each year to mend the crisis, along with a series of “radical” measures to speed up the building process.

Nevertheless, with reaction to the paper veering along party lines, independent experts pointed to the rise of a disproportionately influential “greenbelt elite” (the infamous Not in My Back Yard brigade) as a major obstacle. Indeed, significant numbers of Conservative backbench MPs are broadly sympathetic to greenbelt campaigners and over 40 per cent of councils fail to meet housing projections as a result of local pressure (according to communities’ secretary Sajid Javid).

Another example of this (potentially) blindsided tendency stems from the Government’s decision to pledge an extra £10bn towards the Help to Buy scheme introduced by George Osborne in 2013. Many critics believe the scheme stimulates a level of demand impossible to fulfil (due to falling levels of stock), thereby raising prices and entrenching market problems. Others say its emphasis on new-build properties has exacerbated leasehold issues.

Many experts believe the public sector should be given a primary role in expansive house building. The necessary funding could be met by councils borrowing against their own assets, by levying percentage fees on the final asking price of a house or by increasing tax rates on higher value homes. Alternately, they could form local partnerships with the private sector.

Expert opinion being ignored by executive decision makers

Another possible solution would be to cut stamp duty tax for elderly homeowners and free up houses for first-time buyers. Would it not be wiser for ministers to respond to the clamour for change than to persist with an avenue of tax revenue merely entrenching problems?

Wider tax reform would help to encourage developers unwilling to factor duty tax costs into profit projections pursue a wider range of construction opportunities. It would also re-incentivise buy-to-let landlords and stimulate the need for a stable, competitive market at a time of pronounced demand.

The trouble is, in many cases, expert opinion and grass-roots know-how are being ignored by executive decision makers and the effect is to create a hopelessly disjointed and contradictory housing policy.

Rental-Contract-Pen-Paperwork-Mortgage-700.jpgWith the Help to Buy scheme pushing up prices, young people have no choice but to rent. This places pressure on to a sector already hard hit by initiatives actually designed to increase ownership, and leads to landlords leaving the market, driving down availability of decent rented accommodation and pushing up rents.

Similarly, duty tax measures help to create a static housing market in which sellers are frequently asked to reduce prices in order to cushion the impact of duty, thereby leading to a higher than average stall in sales, as well as a reduction in listings and availability.

All in all, a bit of a mess. It makes the need for consultation and practical advice based on experience more essential than ever. Some of the problems we face are due to political instability. Some are ideological. Nevertheless, there are many options that could help if only they were given consideration at the highest level.
If the Government chooses to embrace a coherent weight of opinion, there is no reason that they will not create a more cohesive policy — the choice is theirs.

Phil Whitehouse is managing director of MCI Mortgage Club

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