Sunday, 19 August 2018

12 solutions to the UK housing crisis

The opaquely funded hard-right think tank IEA has offered a £50,000 prize for an essay outlining a strategy for dealing with the housing crisis. I'm obviously not going to win it with this article given that they're stipulating that the proposal must be a right-wing market based strategy, which is lunacy given that the housing crisis has actually been caused by decades of right-wing market based housing policy. 

As far as I'm concerned a right-wing market based solution to a problem caused by right-wing "leave it to market forces" ideology meets Einstein's definition of insanity; doing the same things over and again, but expecting different results.

So I won't be winning the IEA prize, but the challenge did get me thinking about strategies to deal with the housing problem. Here are 12:

Stop the social housing fire sale

The first, and most obvious step is petting an end to the disastrous fire sale of social housing at way below market value under the Right to Buy scheme. 

The fact that 40% of Right to Buy former social housing properties have ended up in the hands of private landlords is compelling evidence that this scheme was never actually motivated by a desire to increase home ownership at all, but by an ideologically driven desire to ruin social housing provision.

I do believe that social housing tenants should continue to have the option of buying their property, but only at full market value, and only if all of the money from the sale is reinvested in building/repairing social housing for the benefit of future generations.

Build social housing

In the wake of the 2007-08 bankers' insolvency crisis the Bank of England magicked up over £400 billion in Quantitative Easing, which they used to prop up the value of assets mainly held by the super-rich.

If the state can invent new money to protect the wealth of the super-rich, then it should also be able to create money in order to benefit wider society through infrastructure projects.

One such infrastructure project could be a fund for the construction of hundreds of thousands of new social housing units, which would not only benefit the tenants, but wider society too.

The construction of the houses would create jobs and demand within the economy, the tenants would pay rent creating a revenue stream for the government, and being freed from sky-high rents in the private rental sector would provide the social housing tenants with extra disposable income to spend, save, or invest in productive economic activities like starting small businesses.

Monetary reform
Source: Economics Help

One of the main reasons house prices have spiralled out of control is that the amount of money directed into the housing sector is dictated by profit-seeking private banks, not by any logical process.

As long as the private banks keep creating ever more money to pump into the housing sector, it's obvious that house prices will continue to inflate further and further beyond the reach of ordinary people, until there's another financial sector collapse, another set of bailouts, and the whole property price inflation frenzy starts up again.

If the amount of money directed into the housing sector is controlled so that it more-or-less matches wage growth, then house price inflation would no longer keep rising so ridiculously. 

Prioritise lending 

One of the most obscene things about the UK housing market is that it's usually way simpler to obtain a mortgage in order to rent the property out (buy-to-let) than it is to get a mortgage as an owner-occupier.

This is absolutely backwards. The easiest mortgages to obtain should be for people who intend to use the property as a home, and those who intend to use the property as a profit-seeking endeavour should be discouraged by significantly higher rates.

This could be achieved through government intervention with a tax on for-profit mortgage lending, the proceeds of which could be put into a fund to reduce rates for owner-occupier mortgages, and especially first time buyers.

Additional taxes on buy-to-let profiteers would also create a disincentive to them buying up all the affordable property in their area order to live off other people's backs.

Scrap Council Tax

Just think about it. You couldn't really get a more illogical form of local taxation than a tax based on a hastily conducted house valuation process that happened in 1991.

Council Tax either needs to be scrapped and replaced with a more logical form of property taxation, or at the very minimum reformed and updated based on current property valuations.

Land Value Tax

One alternative to Council Tax would be the adoption of Land Value Tax, which taxes all land based on its value.

One of the main benefits of Land Value Tax is that it gives idle land monopolists a huge incentive to put their land to productive use by selling it, renting it, or actually doing something productive with it themselves.

Here's a link to a full article on the subject.

Clamp down on slumlords

One of the worst aspects of the UK housing market is the virtually unregulated environment in which unscrupulous slumlords are left to operate.

In 2016 the Tory party voted down an amendment to their Housing Act that would have created a legal requirement to ensure that all private rental properties are "fit for human habitation".

You would have thought that a minimum legal standard to ensure that private landlords are prevented from renting out properties that are unfit for human habitation would be a decent starting point in tackling the scourge of unscrupulous profiteering slumlords, but no. The Tories voted against it, and it's hardly surprising that 71 of the Tory MPs who voted this measure down are private landlords themselves.

Security of tenure

One of the worst aspects of the private rental market is the lack of security of tenure. The fact that landlords can hoof tenants out after six months creates a perverse incentive to get rid of decent tenants in order to hike the rent and get a new set of tenants in. The landlord gets the benefit of a bi-annual rent hike, and the estate agents get the benefit of two sets of rip-off agency fees every year.

The losers are obviously the tenants who end up on an involuntary cycle of house moving, rent hikes, and rip off agency fees.

One solution to this grotesque profiteering would be to introduce new rules to reward good tenants with security of tenure. If tenants have stayed up-to-date with their rent, and kept the property in decent condition after six months, the landlord should be legally required to significantly extend the notice period on their next contract, so that good tenants never face the prospect of being forced out of their homes at just one month's notice.

Rent controls

The prospect of rent controls gets right-wing free market fanatics wetting their pants with fear. They know that the shockingly unregulated UK rental market is an excellent source of unearned income, and rent controls would significantly impede their profiteering.

The benefit of rent controls is that they prevent private landlords from socially cleansing certain areas by hiking rents way beyond the reach of ordinary people.

If people in wealthy areas want their bins collected, their supermarket shelves stacked, their hair cut, their car washed, or their house cleaned, then it's grotesque to expect those workers to spend hours commuting in from miles outside the area just to do the low-paid work.

As the state builds more social housing, one of the most efficient ways of preventing social cleansing is to introduce local rent controls.

Tax empty properties

There are hundreds of thousands of empty properties across the UK. Research published in January 2018 found that there are at least 11,000 properties that have stood empty for over ten years!

This is absolutely scandalous at a time of rising homelessness, soaring private rents, and millions of working people priced out of the housing market.

One obvious solution is to impose a tax on empty properties, giving the owners a clear financial incentive to either rent them out or sell them off.

Housing stock upgrades

One of the simplest solutions to the housing problem would be a national investment in housing upgrades. There's absolutely no excuse for modern houses to have no roof insulation. heating properties with inadequate insulation is a ludicrous waste of energy and resources.

One of the simplest ways to encourage investment in housing upgrades would be to introduce new minimum standards for private rental properties. If the housing isn't adequately insulated, the landlord is barred from renting it out (and if they leave it empty, they face paying the empty property tax).

Another way of improving housing stock is subsidised schemes to fit insulation and solar panels. Unfortunately the Tory government has been busy ideologically vandalising these kind of housing upgrade schemes because they don't comply with their crackpot "just leave it to market forces" ideology.

Ban tax-dodgers

One of the most obvious solutions of all is to ban tax-dodging shell companies based in tax havens from buying British property. If you're not a British citizen or resident, or an entity registered in Britain, then you're not allowed to buy British property.

Anyone who thinks it's not a real problem that tax-haven shell companies are able to buy up British property really needs to take a look at the Private Eye registry of offshore ownership to get a handle on the shocking scale of the problem.

Just think about all of that dodgy money sloshing around the UK property market, and how much of an effect it's had in adding to property price inflation.

And just think about all the tax that's not been paid, in the UK or wherever the money originated,

There's absolutely no justification for allowing tax-haven based entities to continue buying up such huge swathes of Britain.

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Sarah Saad said...

Sarah Saad said...

Sarah Saad said...