Wednesday, 12 March 2014

How to solve the UK housing crisis in 1 year

By trade, I am an engineer. An engineer's job is to find solutions to problems. At present, the country is run by management consultants. I suspect that the job of management consultants is to make work for management consultants. Most engineers take the view that if something works, you leave it alone but if something is broken you fix it. The UK used to have the best engineers in the world. Brunel is revered for his work building the Great Western Railway and a host of other spectacular engineering feats. Frank Whittle invented the jet engine. The list goes on, Television, Radio, the Internet. 

My father was also an engineer. He invented all manner of strange tools to assist him in his chosen profession of running a crash repair business. During the second world war, my father was a pilot. When he escaped from a prisoner of war camp, he got a new job in the RAF. He became an air accident investigation officer. He learned that if there is a problem, you first identify what caused it. He explained that there was never a single reason for any crash he investigated. You only truly understood the cause, when you has analysed all of the facts. He also taught me that there are two types of solution to a problem. One is a tactical solution and the other is a strategic solution. He explained this. A tactical solution is one that gets you out of a bad situation, a strategic solution is one that stops you needing to get out of the bad situation. An example is if you awake to find a burglar in your house. The tactical solution is to pick up a heavy object and chase him off. The strategic solution was to lock all of the doors and windows properly so he couldn't get in.

So what is the biggest problem facing the UK right now? Well I cannot decide whether it is the NHS or the housing crisis. We've spent a lot of time looking at the NHS recently. What about the housing crisis? It is reported that there are up to a million homes standing empty. There are also another 3 million homes which are "under occupied". In other words, homes sitting with empty bedrooms. Many of these are homes of people who raised families, who have moved out. There are however huge numbers of properties that people are just sitting on, waiting for all manner of things to happen before cashing in on the increased property values. Many are waiting hoping for  an easing of green belt legislation. Others are just waiting for "the right offer". Housing pressures have risen with immigration and with the changing demographics, of more people requiring smaller homes. 

So how can we square this seemingly impossible circle? Well as far as I can see, there is a very easy tactical solution. I doubt many of my socialist friends will approve, but if it solves the problem, so what? It seems to me criminal that homes sit empty whilst people are sleeping rough. When Landlords currently sell second homes, they pay 40% Capital Gains tax. Just suppose for a second that the government said "we will give Landlords a CGT holiday for one year on all property and land disposals". All of a sudden Landlords would have a massive incentive to sell properties which weren't delivering an income. They could even take a hit of 15-20% and still make a huge profit. This would depress house prices as the market would see a large number of properties appear. I would, as an added incentive, waive stamp duty for sales to local authorities and charitable housing associations. 

Now yes, the chancellor would take a hit in lost revenue, but as most of these home would have been sitting empty, there would be an increase in take of tax on electricty and water, which I believe would more than compensate. As I mentioned, this is a tactical solution. What we need is a proper long term solution. Again, I believe this is not as hard as it sounds. Local Authorities should be fined by central government for every resident that they have on their social housing waiting list for more than three months. If central government allowed Councils to take out mortgages to buy property freed up by the CGT holiday, where there is a clear fixed income, then they would have no excuse for waiting lists. 

Of course further down the line, we'd need new council housing to be built as well if we maintain immigration growth at predicted levels. As far as I am concerned, immigration is something which should be addressed by the EU. It is ridiculous that every time there is a new member, there is a flood of economic migrants. This is bad for the country they are leaving and causes all manner of issues, not least in housing for the countries they move to. It cannot be good for impoverished countries to lose their most talented and ambitious citizens. What should happen is that there should be a period of economic assimilation with free movement only becoming available to new citizens when the countries economies reach an agreed state of development. I find it scandalous that the EU funds rich farmers in Western Europe whilst new member states such as Bulgaria and Romania are exporting citizens at a huge rate, due to lack of economic activities. 

I do not subscribe to the UKIP view that we should leave the EU, I believe we should lead the charge to fix it. Us and the Germans pick up the bills, so we should work with the Germans to fix the CAP. As farmers in the UK are a very powerful lobby in the Conservative Party and they do very nicely from the EU, I actually doubt the Tories give anything but lip service to CAP and farming subsidy reform. I also believe that is why the UK will never leave the EU or even bother to fix it.

1 comment:

Jim said...

How about: no stamp duty if the person buying doesn't already own a home?

This prevents people who already own several properties from using the tax holiday for buying more, while also helping the people who use it most.

In practice might need some protection against 'wrapper' companies.

Slight correction: The internet wasn't invented in the UK. We did some of the early work but most was at ARPANET in the USA. A Brit living in Switzerland did invent the web though.