Tuesday, 13 March 2018

How to solve the housing crisis in one year (part 2)

Four years ago, I posted a blog entitled "How to fix the housing crisis in one year". Four years later, the housing crisis is worse than ever. What is perhaps the most disturbing aspect of this is that the preferred solutions of many is to destroy the green belt and cover it in box flats and tarmac. Re-reading my previous blog, I realise that it was one of the worst blogs I have written. Full of waffle and taking three paragraphs to get to the point. The solution is still as valid as it was then, but as the Chancellor is making his economic statement today, I thought I'd give it another go. This time I'll lay out my program more concisely.

1. For a period of one year, cut the rate of Capital Gains tax on sale of second homes and investment properties from 40% to 10% for sales to occupiers, councils and housing associations (not investors).

2. Pass legislation that any capital receipts received by Councils for residential property sales must be ring fenced for provision of council homes and must be spent within two years, otherwise it will be transferred to a ring fenced treasury account for the same purpose.

3. Where there are clear cases of "land banking", allow councils to charge council tax to the developers at the rate that would be applicable if the properties had been built.

4. Pass legislation allowing schools, hospitals, police and fire services to pay a proportion of staff rents without paying income tax.

5. Give residents the right to ensure councils enforce planning law, with penalties for councils which fail to perform their statutory duties.

6. Charge Council tax at quadruple rates on empty properties after one year.

7.  Cash incentives for people in social housing to downsize or take lodgers, where there are spare rooms etc.

I contend that if these five measures were passed, then in one years time we'd have seen a large reduction in housing crisis. Let me explain why. Many people find themselves in a position where they own more than one property. For some this is due to seeing property as an investment, for others this is almost accidental. Many investors simply sit on properties, seeing values rise. It is perceived as a better and safe investment than the stock market. By cutting Capital gains tax for sales to occupiers, councils and housing associations, many investors will be tempted to cash in. With a 30% cut in tax, many investors will realise that they can charge less and still make more. The rules would not apply to sellers selling to other investors. There are many houses sitting empty, with 200,000 sitting empty and  over 10,000 empty for over ten years.  This is not good for anyone.  Getting these back in use should be the first priority as this is a quick win. I suspect that this would also give a huge one off tax bonus for the treasury 10% of something is a lot more money than 40% of nothing.

Forcing councils to reinvest all money from property sales back in social housing would at the very least stem the flow of social housing to private landlords. The "right to buy" legislation has created a terrible situation for young, working class people on low wages seeking to start families.

Land banking by developers has meant that houses that should have been built are not. Making this expensive for developers will ensure that they take the turn the taps on for the supply of housing. Commercial companies react to pressures on the bottom line.

Public services are suffering because they can't recruit people. It is simply too expensive for staff to live in places like London on low wages. It is a no brainer to allow such organisations to help staff, without having liabilities for tax etc.

Giving residents the right to ensure that councils enforce planning law may seem like a perverse way to fix the housing crisis. It is quite the opposite. Unscrupulous landlords buy up properties, put sheds for rent in the garden, flout rules to cram in people  into unlicensed HMO's etc. This totally distorts the housing market, meaning that prices are pushed up beyond the reach of first time buyers. Areas end up blighted and all manner of social problems ensue. Once landlords are forced to abide by the law, then there will be an incentive to address housing issues properly. Before the minimum wage laws were passed, many Tory commentators claimed that we'd see a huge burden on the welfare system as people lost jobs. As it happened, the reverse happened. The taxpayer pays less in benefits as people are actually paid a decent wage. The same will happen in housing. If rogue Landlords are forced out of business, then the quality of property will rise and low quality, clapped out properties will be replaced with more appropriate new builds.

Finally, we need to address the issue where people live in houses with spare rooms, whilst others have nowhere to live. Of course in the  private sector, this is their business. In social housing, this is a different matter. There are two measures I'd like to see enacted. The first would be financial incentives to downsize. I believe that the "bedroom tax" is abhorrent.  I would prefer a system where a lump sum is given from a central fund for anyone who downsizes in social housing. Given the cost of building new homes, a payment of say £10,000 to downsize would be a sensible, economical measure. Another thing I'd like to see is incentives for tenants to take lodgers. In some cases, this is prohibited. I'd like to see a scheme where "little old ladies living alone in 4 bedroom houses" could let rooms to public service workers without sanction. This would provide an added bonus of company and someone around if there was an accident.

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