Generation rent

 

Most people want to own their own home. Today it is too difficult for many young people to do so. How should this be tackled?

Some suggest renting is better, more flexible. They usually make these statements from  their  home which they own!  Renting is meant to take the stress of home ownership away, as mending a fault or problem should be just a phone call away to the landlord. That’s fine if the landlord is attentive, but it can be far worse than getting on with sorting out your own fault if he or she does not co-operate speedily. Renting limits your ability to improve and change your home environment. It takes much of the pleasure of a place of your own away. Many Generation Renters can only afford to share rented premises with others, so it is not a true home of their own. If you rent throughout your earning years you will be paying even more rent when you retire. If you have bought a place of your own and repaid the mortgage before you give up work, costs in later life are lower and easier to pay for out of the pension.

So how can we give more people the choice of owning and the chance of buying?  There are various policies the next government could adopt to help.

First we need control of our own borders, with a measured approach to migration. We are not building enough new homes to deal with all the demand resulting from demographic change, largely driven by migration.

Second, if the government reduced Stamp Duties buying a home would be cheaper, and more homes might come onto the market as people would be more willing to trade up or down.

Third, cutting CGT to an optimising rate, so more people with homes they do not need would be willing to take their profits.

Fourth, putting more emphasis on affordable homes for purchase, shared equity and other ways to make owning possible within the substantial budgets and programes of social housing

 

I would appreciate your thoughts on what else could be done to assist.

 

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

131 Comments

  1. Mark B
    Posted July 9, 2014 at 5:54 am | Permalink

    John Redwood MP said;
    “So how can we give more people the choice of owning and the chance of buying? There are various policies the next government could adopt to help.”

    It is not the business of government to ‘game the market’. Leave well alone and let the market decide. It will, over time, find its natural level. When rentals rise above what people are prepared to pay, the market will stall and prices drop. When government continues to subsidize with tax payers money, the market will become distorted.

    If I tried to influence the market the same way that government thinks it can, then I would be accused of ‘rigging the market’ and, would be prosecuted. What right does government think that its is somehow above the law ?

    There can be no control over other citizens of the EU – PERIOD !!!! This fantasy that our kind host indulges in will lead to nowhere. We can reduce or stop it from non-EU immigrants but, with the likelihood of illegal immigrants, which are currently flooding into Italy, being moved to other EU Member States then, I fear our problem will just get worse.

    In short, you are trying to put out the flames by pouring petrol over it.

    Total disconnect.

    • Colin
      Posted July 9, 2014 at 6:36 am | Permalink

      What market? We have a communist land use planning system, not a market.

    • formula57
      Posted July 9, 2014 at 7:01 am | Permalink

      If per Mark B “It is not the business of government to ‘game the market’ then the government must cease regulating supply too though planning laws and similar restrictions that do or can have the effect of choking supply.

      Supply sufficient to match demand is the key to pricing, unsurprisingly. Alas, the British people hold fast to the fond and naïve belief that we are all rich and have a booming economy because we sell properties to one another at ridiculously inflated prices. It would be tragic if this illusion were shattered and so politicians and governments have an interest in preserving it (being unable to deliver riches and a soundly booming economy) which means not that much will likely change.

    • oldtimer
      Posted July 9, 2014 at 7:14 am | Permalink

      Unfortunately the mess the housing market is in is primarily the responsibility of successive governments as they imposed their own, politically inspired ideas, of what it should look like. This they have done over the years through planning regulations (not mentioned by JR), taxation (stamp duty and CGT), policy on interest rates and subsidies (council house rents) to name but four drivers of behaviour in the housing market.

      Politicians are meddlers in the lives of others. That is their raison d`etre. More often than not, they make a mess of it. If there are helpful ideas to unpick some of the mess and reduce the distortions (such as more tax neutrality and less subsidy) the better it will be for the housing market – and for just about every other aspect of life too.

    • Denis Cooper
      Posted July 9, 2014 at 7:54 am | Permalink

      Well, the government got away with rigging the market in its own bonds.

      But on the matter of immigration from the rest of the EU, the answer is obvious.

      • acorn
        Posted July 9, 2014 at 4:05 pm | Permalink

        Oh for ***** sake Denis. The Government does not rig the Bond market the Central Bank does it. The Sterling Bond market can’t do anything the Central Bank doesn’t want it to do.

        If the “market” pushes up yields (interest rates) in any particular Bond series, the Central Bank will step in and buy that series and force the yield down to where it wants it to be. Similarly, it will sell that Bond series into the market, from its holdings. to force the price down and the yield up.

        The government does not have to issue debt instruments Gilts, other than for the Central Bank to use them to control “reserves” hence, its policy interest rate (Bank Rate in the UK). If the government stopped issuing Gilts, it would transfer its overdraft (budget deficit), to its “Ways and Means” account at the BoE and the BoE would issue its own debt instruments to control Bank Rate.

        The BoE used to do all this stuff before the government invented the DMO (Debt Management Office) to control its cash requirement. Remember, you can’t buy the governments debt (Gilts), unless the government has spent enough of its Pounds into the private sector previously, to pay for them. Taxes don’t pay for anything. Taxes are used to control the aggregate demand for goods and services by the private sector and leave some for the public sector to buy for public purposes.

        • Denis Cooper
          Posted July 10, 2014 at 7:53 am | Permalink

          “Oh for ***** sake Denis. The Government does not rig the Bond market the Central Bank does it.”

          That’s quite amusing, given how many times I’ve been told that the Bank of England is part of the government.

    • Jerry
      Posted July 9, 2014 at 7:57 am | Permalink

      @Mark B: “It is not the business of government to ‘game the market’. Leave well alone and let the market decide. It will, over time, find its natural level. When rentals rise above what people are prepared to pay, the market will stall and prices drop. “

      Good grief, housing is not like the market for Baked Bean, were we can chose to purchase or not, people will find the money to pay the rent [1], either that or they will be living in Cardboard City…

      It is the business of government to plan and make provisions for a functioning society, even if normally it is not the job of government to ‘game the market’.

      [1] even if that means living on baked beans day after day or on the hand-out from a food bank

      • Mark B
        Posted July 9, 2014 at 2:06 pm | Permalink

        Jerry said;

        ” even if that means living on baked beans day after day or on the hand-out from a food bank”

        Which in your version of Communist Utopia, many people did and are now doing.

        What people like you do not understand is, people are greedy and will take advantage of others. To that end, when government injects cash subsidy, whether it be a bank, a company or some scheme like ‘Right to Buy’, there will always be those that will seek to take advantage of government largess.

        Government, or MP’s do not care, its not there money. But is the money of those who that tax. Taxes that our earned through those that work and create wealth, and indeed may not be wealthy themselves.

        A government that sees fir to take that from someone that has earned it through the sweat of their brow, and give it to another who has not, is in my view, Communist. And we all know what happened under Communism. I would ask the Kulaks, but I’d doubt you will find many, as Stalin had them all killed.

        • Jerry
          Posted July 9, 2014 at 7:08 pm | Permalink

          Mark B: “What people like you do not understand is, people are greedy and will take advantage of others.”

          Glad to see that you share at least some social democratic values, that is exactly what the centre and left have been saying for the last 35 years about the lack of socail housing and now the glut of BTL property at vastly over prices rents – and you have the nerve to accuse me of having a “Communist Utopia” when all I’ve suggested is that part of any government job is to plan…

          “A government that sees fir to take that from someone that has earned it through the sweat of their brow, and give it to another who has not, is in my view, Communist.”

          Oh dear, I knew it could last. So in your opinion then the USA is a communist state, because they take taxes (both federal and state), they have an element of socail care too, or could it be that the USA is nothing of the sort, and that you are just one of those who subscribes to the notion of “I’m al’ right Jack, sod the others”…

        • Bazman
          Posted July 9, 2014 at 8:12 pm | Permalink

          Exactly and how dare you put the communism for the rich of Britain onto the poor of Europe who only ask to come here to work to help themselves business. Why should they be excluded to support the bone idle lifestyles of working and work less Britain sucking up benefits from the industrious. They are working and passing on the cost savings of lower standards of living helping Britain to compete with low wage economies often their own and should be welcomed with open arms. Any obstacle put in their way should be to encourage only the finest to come here. The logical conclusion being that if you do not want to work you are a liability and should be sanctioned in some way with being replaced in some way by a more productive person.

          • Bazman
            Posted July 10, 2014 at 7:58 pm | Permalink

            This is either being censored by John Redwood which I doubt, or there are no replies. How dare you think this without being able to defend it as this proves. It’s like Gove claiming all today’s strikers are just on strike for, as he outs it ‘idealogical reasons’. This many can afford this luxury?! Guv? Especially you Silliband with your middle class response of “Nobody wants a strike” Idiot. Here’s the plan. Guv and Silly. We go to the pub and get wrecked…
            Come out wherever you are…

    • Vanessa
      Posted July 9, 2014 at 10:27 am | Permalink

      Mark B – well said, I could not agree more. Why do people have this mindset that the government has to give us everything, run everything and pay for everything? Britain used to be “conservative” with a small “c” meaning we each took responsibility for our lives and helped family etc. if needed and never looked to government to do everything for us.

      With Labour in for so long the attitude changed and with so many immigrants they all think the government is there to give them everything they want encouraged by the EU. The poor taxpayer is not there to bail out all visitors to this country it is there to make sure the infrastructure – roads, hospitals, schools, etc. are run efficiently for we the citizens. The government is becoming a surrogate parent and an extremely incompetent and irresponsible one at that !

      • Anonymous
        Posted July 9, 2014 at 2:38 pm | Permalink

        Venessa – I happen to disagree with Mark. Certain responsibilities have been abrogated by government and some of the less desirable effects show up in the cost of housing and the general accommodation crisis.

        A reversal of some recent policies is needed.

        (My thanks for Dr Redwood for his brave comment)

        • Anonymous
          Posted July 9, 2014 at 6:19 pm | Permalink

          John Major was unbelievable on The One Show this evening. On the subject of exploitative landlords he blamed everything on the housing crisis from the aged to the divorced – everything barring one thing: his signing of the Maastricht Treaty.

          He alluded to his own upbringing stating that substandard accommodation was ever thus and just still happens to be with us.

          Rot.

          Things were getting better until he signed that awful document and put us in reverse.

          • Jerry
            Posted July 10, 2014 at 7:45 am | Permalink

            @Anonymous: “everything barring one thing: his signing of the Maastricht Treaty.”

            Do remind me how long the “housing crisis” in the UK has been around, sorry I didn’t realise that the housing Charity Shelter (for example) was a mere 20 odd years old rather than being formed back in 1966, and its roots even further back.

      • Jerry
        Posted July 9, 2014 at 7:22 pm | Permalink

        @Venessa: “Britain used to be “conservative” with a small “c” meaning we each took responsibility for our lives and helped family etc. if needed and never looked to government to do everything for us.”

        You need to go back a long way in modern politics to find that utopia, well over a 100 years now. Just how many council houses do you think were built (never mind planned for) between 1951 and 1964 for example, and how many miles of Motorways were planned and the building started – neither of which according to your doctrine should have been.

        What is more, many private business grew rich on both building socail housing and motorways, whilst a wide spectrum of society benefited from provision both socially and/or economically, even if only temporally.

    • APL
      Posted July 9, 2014 at 10:46 am | Permalink

      Mark B: “It is not the business of government to ‘game the market’. ”

      Agree.

      JR: “How should this be tackled?”

      Get the government out of the property market, restrict immigration. Allow prices to fall to where first time buyers can afford to buy.

      • Jerry
        Posted July 9, 2014 at 7:31 pm | Permalink

        APL: “Get the government out of the property market, restrict immigration. “

        Well yes that will stop the influx of the rich oligarchs from buying up London … what was that APL, oh you didn’t mean those sorts of migrants….

        • APL
          Posted July 12, 2014 at 11:59 am | Permalink

          Jerry: “what was that APL, oh you didn’t mean those sorts of migrants….”

          You silly man.

    • Lifelogic
      Posted July 9, 2014 at 12:34 pm | Permalink

      I agree, “It is not the business of government to ‘game the market’. Leave well alone and let the market decide.” In general it should be fiscally neutral between buying or renting. It used to be better (in tax terms) to buy as you had mortgage interest tax relief and no CGT on the gains for PPR. Now with excessive stamp duty, 20% vat on all the legal etc. fees (and better benefits for renters fallen on hard times than owners) it can be better to rent.

      There is however an advantage to the country, the Tory party and government in having more owner occupation. This is because it is (especially with repayment mortgages) a form of enforced saving. This saving can then be used as collateral for new businesses, to help children buy a house, to down size later, or to pay for long term care. It makes people less likely to resort to government benefits (or rather resort to other peoples taxes).

    • Martin
      Posted July 10, 2014 at 12:04 am | Permalink

      What you ignore is that people also leave the UK to live, study, retire and work in other EU countries.

  2. margaret brandreth-j
    Posted July 9, 2014 at 5:54 am | Permalink

    You only need to look on the website to see the vast amount of houses up for sale John . Most have been reduced time and time again , but there is no market for them.There are dozens of cheap empty flats. Why build more?

    • Colin
      Posted July 9, 2014 at 6:36 am | Permalink

      What’s the weather like on your planet?

  3. margaret brandreth-j
    Posted July 9, 2014 at 6:03 am | Permalink

    It may be a good idea if housing associations bought up the houses on the market , shared the mortgage cost with a new owner and then there would be scope for getting on to the ladder with property for youngsters . If no one will buy , there will be no initial trigger.
    At present builders are encouraging the down pricing of properties so they can renovate and sell themselves. Some are even putting a stop to individuals trying to sell so they can collectively get a profit.

    • Lifelogic
      Posted July 9, 2014 at 10:16 am | Permalink

      Where are the housing associations going to get the money from to buy up these properties? – the magic money tree again. Anyway it would just restrict the supply for the others and push up prices.

      • Bazman
        Posted July 11, 2014 at 6:43 am | Permalink

        Millions of daft privatly built houses have been bought by councils as the private market was unwilling or unable to buy them. Preumbly bought using money from your magic tree?

  4. Lifelogic
    Posted July 9, 2014 at 6:05 am | Permalink

    Indeed get rid of stamp duty (which make ownership less attractive especially when you may need to move regularly), lower CGT to say 15% with indexation against inflation.
    In addition we need to relax planning hugely. Why can we have endless land as homes for pigs, cows, sheep, absurd uneconomic photovoltaics, rape seed, sugar beet and the rest but restrict it so hugely for humans? Furthermore we need to relax the absurdly over the top building regulations with there endless green drivel, disabled access drivel, preservation of trees, newts & bats nonsense. Oh and of course selective immigration.

    Training some decent tradesmen & builders for a change would help too.

    Renting is often still cheaper in the short term often, say 5 years or fewer, when you do the sums.
    If you buy you have stamp duty, legal fees, agent fees to sell, maintenance, insurance, valuation fees, abortive cost often …… so unless you time it well when prices are rising renting will often be cheaper – unless you are keeping it medium to long term. Many areas have stagnant prices or only slightly increasing prices after all. Many area now are set for a period of stagnation too.

    • Bazman
      Posted July 9, 2014 at 7:01 am | Permalink

      Five star hotels are the best for renting needs I find, but what can be cheaper than five to room houses and more flexible for employers and the labour market? As for training more tradesmen who do you propose pays for this the state, the companies or themselves? Which is it. Specific answer and not ranting drivel which should be about why the building industry does not up its game with higher standard of build quality and more disabled access and preservation of nature, not less.

      • Lifelogic
        Posted July 9, 2014 at 6:37 pm | Permalink

        Neither the trainee who gets the benefit pays, perhaps with a government loan.

      • libertarian
        Posted July 9, 2014 at 11:04 pm | Permalink

        Oh I like easy ones

        Who benefits from the training? The recipient therefore people should fund their own. If an employer wishes to up skill their workforce then they should pay.

        Your attempt at sarcasm re 5 star hotels is pathetic. Of course if the average tenant lived in a 5 star hotel it would pretty soon loose its 5 star rating.

        • Bazman
          Posted July 10, 2014 at 6:02 pm | Permalink

          The employers are going to have to pay higher rates if this is the case. What next? Pay for your own materials? Industry spent years poaching each other staff and abandoning their training schemes leaving the shortage of skilled people we see today and the resulting attempts to find in their own words ‘a magic bullet’ in the form of cheap EU labour who would work for less than the skilled rate hoping they could produce acceptable work by micro managing them in some cases. Don’t forget that the skills are of use to industry not just the individual. bosses have and always wanted skilled work at labourers rates and are now finding out that due to their previous practices and governments policies are now having to pay. Massive shortage of welders leading to higher wages or those attempting to get something for nothing. Interesting to see how BAE Systems get their ‘mass of welders’. Not for that rate! They can…. well you know it.

          • Edward2
            Posted July 10, 2014 at 11:10 pm | Permalink

            There is a market for labour Baz.
            As an employer you place an advert for a vacancy and you offer a wage.
            Either you get no applicants or you get a huge number of responses.
            If you get no replies you up your wage offer.
            Good for the welders if they can advance their wages due to a shortage of skilled available people.

            You support the EU yet moan about the effect of the open borders which has lowered wages especially for the poorest low skilled people.
            This is why big business is also enthusiastic about the great project.

          • Bazman
            Posted July 11, 2014 at 6:51 am | Permalink

            If you get no replies you up your wage offer? Oh really is this how it works? Depends on how specialised the work is. What they do in many cases is increase their searching or fishing, using employment agencies often for month or years in an attempt to find a fool or someone desperate enough. Or if near London rely on the mass of workers available. This competition is good and the British worker should compete with Europe. After all if they can live five to a room/car and pass on these savings why should the British worker not? Are they expected be some sort of working royalty?

          • Edward2
            Posted July 11, 2014 at 12:24 pm | Permalink

            Its rare you get no replies because you know what staff are asking for and you know what you can afford and you know what the local businesses you compete with are already offering.
            Sometimes the employers has the greater power and sometimes the applicant has the greater power in this process.
            In a similar way much of engineering in the Midlands was wrecked by (overseas ed) competition, very cheap imports made by very cheap labour.
            Good for the consumer perhaps, but bad for jobs and local industry long term.
            So I agree Baz, that wage rates have been reduced and a major factor has been several million new hungry arrivals competing for the available jobs.
            You may blame employers, I blame the EU.

    • Jerry
      Posted July 9, 2014 at 8:13 am | Permalink

      @Lifelogic: “Why can we have endless land as homes for pigs, cows, sheep, absurd uneconomic photovoltaics, rape seed, sugar beet and the rest but restrict it so hugely for humans”

      With the exception of photovoltaics, because humans not only need a place to live but also food perhaps? :)

      But I have to agree with your comments re building regulations, unfortunately this government hasn’t been in any place to undo the damage done by John Prescott’s root and branch revisions of so many building regs. – that often seemed more to do with restricting how or who could do the work than any real safety issues.

      • Lifelogic
        Posted July 9, 2014 at 9:01 pm | Permalink

        Yes but most of these activities (in the UK) such as PV, sugar beet, rape seed, sheep etc. are not even economic in the UK without CAP or other subsidy. Planning turn down may house application for the sake of one pathetic tree.

        Eat a little less meat and build on the acres free up by this perhaps. Most eat too much anyway.

        • Jerry
          Posted July 10, 2014 at 7:50 am | Permalink

          @Lifelogic: Farming in the UK has actually been damaged due to CAP, hence why UK government have been trying to get reforms of CAP for as long as we have been in the EEC/EU.

          Farming in the UK could be very profitable.

        • Bazman
          Posted July 11, 2014 at 6:16 pm | Permalink

          To much salmon, steak, and caviare washed down with the finest cake and wine available to humanity by any chance? How much of Britains land is used for the production of these foods? Very little and next to none I should imagine, so what is your point?

    • Mark B
      Posted July 9, 2014 at 8:57 am | Permalink

      What is the point of Stamp Duty ? Has anybody ever really asked ? I know I have here in the past, but never received and answer.

      Where does the money raised for this tax go ? What does it get spent on ? Its not like the Road Fund License / Tax that allegedly goes to pay for the roads.

      @LL I cannot agree with your second paragraph. If cows, sheep, pigs and arable crops are not for human consumption, then what are they then ?

      Concreting over every piece of land will not solve the problem of housing and will not address, what is for me, the main issue. That of infrastructure.

      Very little on these or any pages is given over to this important subject.

      • Lifelogic
        Posted July 9, 2014 at 9:03 pm | Permalink

        Eat less meat or import it most of us are too fat anyway.

        • Bazman
          Posted July 11, 2014 at 6:52 am | Permalink

          Or just buy from Harrods.

    • Lifelogic
      Posted July 9, 2014 at 9:00 am | Permalink

      After all if you have little money you either rent the house/flat or you rent/borrow the money to buy one. The real difference is gearing. If you buy with say a 90% loan and buy at a good time your 10% of capital (plus costs) can end up at many times what you put in. On the other hand you can be wiped out very easily should prices fall.

      Also buying a house especially with a repayment mortgage is enforced saving. When people rent is it usually cheaper in the short term but they just tend to spend what they have left rather than saving it. Then again why bother to save when the bank gives you a -2% real return then the government have the temerity to tax you on your losses on boot!

      • Bazman
        Posted July 9, 2014 at 6:44 pm | Permalink

        You laughably assume that there is money left after renting and this is just squandered by most. As if. Like bikes are powered by salmon, caviare and fine wines one presumes? Mine was powered by a last nights home made curry and beer. Getting fed up with salmon and steak ruining the environment and also fancied a change to reduce running costs of this expensive bike. Should of bought a £100 quid one I’ve heard they run on pot noodle. D’oh!

    • Lifelogic
      Posted July 9, 2014 at 9:05 am | Permalink

      Off topic should we really be giving student loans of £27,000 to retired people (and many people from the EU) for university courses when they are clearly often rather unlikely to ever repay them. Especially when about 70% of university courses here are so poor and pointless.

      • Jerry
        Posted July 9, 2014 at 8:03 pm | Permalink

        @Lifelogic: Talking of the retired UK citizen, but they have paid their taxes all their lives, so they are just as entitled to these courses, call it a return on their loan to government! :)

    • stred
      Posted July 10, 2014 at 9:11 am | Permalink

      Buy a house and lose your job or business. There will be little help from the state for mortgage repayments and you will be out in 6 months and lumbered with debts after the house is sold off cheap.

      Rent a house and lose your job. There will be help with housing benefit and, even if you don’t pay it all to the landlord, it will take 6 months and a Court Order before you have to leave. If you have no money or declare yourself bankrupt, you will probably get away with debts. Then in two years you will be free to start again.

  5. Mike Stallard
    Posted July 9, 2014 at 6:07 am | Permalink

    I want to talk about renting.
    I had to do it for ten years. It really does all depend on the landlord. If you have a good one – and mostly we did, then it is superb. OK so you cannot do anything to the house or garden much. But it is cheap and safe and the place turns into a home. You can be evicted – and we were when our landlord gave us six months; notice when he decided to sell.
    With a bad landlord, and I mix with quite a lot of people who tell me things, renting is sheer hell. Mushrooms down the walls, holes in the bathroom wall, one stove with one burned for 11 people.
    How do you cope with that?
    And then there are drunk, drugged up, shouty, destructive, criminal neighbours who affect renters and owners equally…

    • Jerry
      Posted July 9, 2014 at 8:23 am | Permalink

      Mike Stallard: “With a bad landlord, and I mix with quite a lot of people who tell me things, renting is sheer hell. Mushrooms down the walls, holes in the bathroom wall, one stove with one burned for 11 people.
      How do you cope with that?”

      Local authority or housing associations perhaps? What is more if there was a proper, and confidential, method of complaint process about such bad landlords, with a loss of rental income equal to the repairs/improvements that needed to be carried out, perhaps even the ultimate sanction for the most seriously offending landlords of having the ownership of the said property transferred to either the LA or a HA, in such circumstances very few landlords would risk their investment(s) by not having repairs/improvements made.

    • Mark B
      Posted July 9, 2014 at 9:04 am | Permalink

      Mike

      Good point about Landlords, and indeed other tenants and owner-occupiers.

      I think things have improved a little since the days of (Rachman ed) and van Hoogstraten, but not nearly enough.

      If our Parliament and Supranational Government can create and in force standards and laws by which animals are bred, kept and slaughtered, then at least they can do something by which the standard of rental properties are allowed to be rented on the market.

      Also, I think those that rent should be properly vetted and where necessary, bad people listed. Controversial I know, but what else can one do ?

      • Jerry
        Posted July 9, 2014 at 8:11 pm | Permalink

        @Mark B: “I think things have improved a little since the days of Ratner and van Hoogstraten, but not nearly enough”

        I think you mean Peter Rachman, as in “Rackmanism”, (Gerald) Ratner was the Jeweller who infamously made an on the record joke about selling “crap”, etc ed

    • Lifelogic
      Posted July 9, 2014 at 9:12 am | Permalink

      Mushrooms down the wall is usually causes by tenants having many showers, not opening bathroom windows to ventilate properly and not often having the money to heat the place properly to dry out.

      But it makes good anti-landlord TV footage for the BBC. Rarely is it an actual defect in the property such as gutters or roof, usually just condensation on outside walls from bathroom steam.

      • Bazman
        Posted July 9, 2014 at 6:34 pm | Permalink

        Same old same old. Landlord blaming the tenant who probably cannot afford the heat as you have installed electric heating to save money in maintenance.
        It is also caused by landlords failing to fit extraction fans as they are required to do in bathrooms of a certain size. I had to do this when I was a landlord. Opening a window is not good enough Rachman and the law agrees.
        Next week as I am having this problem in my house fixed by having ventilation fitted to the soffits and an extraction fan removing air from the bathroom out of the roof via a ventilation tile. This along with the pointing of the roof will cost about £500 quid by a roofer.

        • Jerry
          Posted July 10, 2014 at 8:00 am | Permalink

          @Bazman: “Landlord blaming the tenant who probably cannot afford the heat as you have installed electric heating to save money in maintenance.”

          Electric heating can actually work out cheaper than gas these days, especially in small or accommodation with a single occupancy even without the savings that can be made by using cheap electric tariffs like “Economy 7″.

          • Iain Gill
            Posted July 10, 2014 at 12:44 pm | Permalink

            If you are worried about heating bills I can recommend getting a flat above BBC premises. I had one for a while.
            The BBC downstairs ran their heating full blast 24/7 all the time, so there was no need to ever turn the heating on.
            Now as a licence payer I’m not too happy, but at the time it was good for me.

          • Jerry
            Posted July 10, 2014 at 5:07 pm | Permalink

            @Iain Gill: “The BBC downstairs ran their heating full blast 24/7 all the time, so there was no need to ever turn the heating on.”

            Understandable if there was any likelihood of the premises was likely to be used at any time 24/7, or if there was electronic (especially audio and video tape) equipment, even if only used infrequently. Much how IT data centres are kept at a constant temperature also.

            “Now as a licence payer I’m not too happy”

            You should be, the needles replacement or repair costs would likely have been an ever greater waste of the licence payers money!

          • Bazman
            Posted July 10, 2014 at 6:12 pm | Permalink

            Electric heating on Economy 7 is close to gas, but more inconvenient and less controllable especially in a non daft sized home. They would have to pay a higher rate for other appliances such as a cooker, tumble drier, microwave etc.
            The idea that electric flat is similar in costs are in your dream world. Scientific scrutiny and my age of older than yesterday proves this. Would any savings in maintenance be passed on in the rent? As if.

          • Jerry
            Posted July 10, 2014 at 7:46 pm | Permalink

            @Bazman: “in your dream world”

            That from someone who thinks wind turbines can generate electricity when the wind doesn’t blow, that PV can deliver electricity at night and that both are cheap as chips to build in commercially Mw sized inhalations!

          • Bazman
            Posted July 11, 2014 at 5:39 am | Permalink

            The facts are Jerry that in many cases wind turbines and pv are viable, upseting as this may be for you. I have never claimed this or covesional sources of power can run without fuel. You are now resorting to insults without factual basis as you have no real answers.

          • Jerry
            Posted July 11, 2014 at 10:43 am | Permalink

            @Bazman: If you need expensive back-up provision to these renewable then why not just use these back-ups, the only economic justification is based on a supposed threat from CO2, but that is increasingly being proved to have been a lie.

            As for insults, quite what it is you think I said was insulting, unless it was the quote were you suggested that I was in dreamland…

          • Bazman
            Posted July 11, 2014 at 5:19 pm | Permalink

            You are assuming that the loads have not been taken into account and during peak loads the alternative sources are not backing up the conventional always the conventional backing up the alternative. In some areas of the world the former may well be the case. Depends on the circumstances and application like any other syytem of energy use or generation. Tell us where the CO2 threat has been proved a lie in your own mind or by scientists looking at the data?

        • Edward2
          Posted July 10, 2014 at 8:20 am | Permalink

          Make sure you get a proper bill for your records and pay the 20% VAT on that £500 bill Baz.
          You complain regularly on here about those you say are avoiding or evading paying their fair share of taxes to help the poor, so it would be unthinkable for you to do the same now wouldn’t it.

          • Bazman
            Posted July 10, 2014 at 6:15 pm | Permalink

            A tradesmans main fear is not being paid not how they are paid and they cannot avoid VAT on materials such as the extractor fan.

          • Edward2
            Posted July 10, 2014 at 11:13 pm | Permalink

            I wasn’t thinking of the tax position of the tradesman but more of your position.
            Not really answering the original question as usual I notice.

          • Bazman
            Posted July 11, 2014 at 6:55 am | Permalink

            I’m not responsible for traders tax affairs. It is enterly up to him what reports. I’ll ask the banks next time as well huh?

          • Edward2
            Posted July 11, 2014 at 12:33 pm | Permalink

            If you pay cash and get no VAT invoice from a registered trader then you are complicite in avoiding the correct amount of tax being paid to HMRC.
            Either your 500 bill should be 600 with VAT added or the price of 500 includes VAT.
            Without a proper invoice you dont know.
            Not caring about what the other party is doing with the money isnt a good answer Baz, because if you ran a small company and said that to a VAT inspector you could find yourself prosecuted or having to pay the VAT yourself.
            This type of trading reduces Government revenues and means that perhaps some poor person has their welfare reduced.

          • Bazman
            Posted July 11, 2014 at 5:36 pm | Permalink

            Tradesmen generally prefer cash due to the ease of accounting and cash being widely accepted in pubs and shops, but more seriously if you pay cash without getting a receipt you have no comeback. Thanks for you moral guidance pity it does not seem to apply to the massive benefit cheats and scroungers plundering the system or the fact that you cannot tell us why the British person should be subsidised against cheaper labour?

      • Jerry
        Posted July 9, 2014 at 8:22 pm | Permalink

        Lifelogic: “Mushrooms down the wall is usually causes by tenants having many showers, not opening bathroom windows to ventilate properly and not often having the money to heat the place properly to dry out.”

        In my experience it’s solely a ventilation issue, thus a landlord issue, remind me how much a decent bathroom time switched ventilation fan [1] costs (and I don’t mean those small fans intended to clear the smell from recent lavatory use)? Even more so when one considers that some landlords consider that bathrooms can be contained within the building, unlike living and bedrooms that must have at least one opening window to the outside.

        Of course if the regs have changed then I’ll stand corrected.

        [1] or indeed one operated by humidity

        • Bob
          Posted July 10, 2014 at 12:17 pm | Permalink

          @Jerry

          “In my experience it’s solely a ventilation issue, thus a landlord issue,…”

          In my experience, the tenant refused to open windows or turn on the heating and used the triple pole isolator switch to disconnect the fan and thus reduce electricity usage.

          Would you consider that a landlord issue Jerry?

          • Jerry
            Posted July 10, 2014 at 5:10 pm | Permalink

            @Bob: Yes.

      • stred
        Posted July 10, 2014 at 9:39 am | Permalink

        Bathrooms and kitchens can be cleared of water vapour and condensation by opening a small window for ten minutes after use and leaving a strip vent open. The vapour disperses to outside, where pressure is lower. The problem is that tenants usually will not do this. Even where fans are installed to do the same thing, they are often not used sufficiently.

        I let a flat which had been double glazed, insulated and decorated, with new kitchen and bathroom and new doors. The first tenant put his wet clothes to dry on the wardrobe doors and radiator, straight from the washing machine. His mother complained about the damp conditions before he left. The second tenants lasted two years, during which time two extra mammals appeared, breathing out water vapour, she dried her clothes inside using a tumbler dryer inside and more damp appeared on the walls. Environmental Health visited and they found a leak in the boiler cupboard from the new boiler, put in 2 years before. The tenant had not noticed. They have now gone, far away with no forwarding address. Almost everything in the flat was broken, even the doors and flooring.

        This unscrupulous landlord has now been repairing one empty property for 12 months and the above for 6. Unfortunately, CGT prevents their sale.

        • Bob
          Posted July 11, 2014 at 9:50 am | Permalink


          “This unscrupulous landlord has now been repairing one empty property for 12 months and the above for 6. Unfortunately, CGT prevents their sale.”

          In our socialist la la land only the landlord can be described as unscrupulous. Tenants can only be described only as “exploited”.

          Most landlords know the truth.

          Jerry has obviously never let a property.

          • Jerry
            Posted July 11, 2014 at 10:50 am | Permalink

            @Bob: What ever…

    • bigneil
      Posted July 9, 2014 at 5:29 pm | Permalink

      “mushrooms down the wall” – -if you were a spin merchant you would twist this and say -” free organic food “

  6. David Cockburn
    Posted July 9, 2014 at 6:18 am | Permalink

    I have to say that by far the most effective way to increase ownership is to lower price by increasing supply. That means getting rid of the Socialist planning system which has been captured by home owners with a vested interest in high prices .
    Unfortunately the developers, both public and private, have shown that they are not to be trusted to produce decent, nice looking, inexpensive homes.
    I’d suggest one immediate first step would be to allow an individual who owns a piece of land to build a single house for him/herself without restriction while retaining the restrictions on developers. In order to stop serial building, a large tax could be charged if the house was sold or rented out within 5 years.

  7. John E
    Posted July 9, 2014 at 7:06 am | Permalink

    My sympathies are with those forced to rent as well as those who have been sucked in to taking out mortgages at four or five times their salaries who may be in real trouble when interest rates return to normal.
    There does seem to be some sanity returning to the London market (or at least a cap on the insanity) but overall we have a very strange approach to house prices in that they are the only necessity of life that we like to see becoming more expensive. I thought the crash might cure us of this but the current government is doing its best to re inflate the burst bubble. Selling up and downsizing is the last hope of a decent retirement for many who lack a proper pension, and to that extent it is a case of the older generations extorting the younger.

    A proper affordability test on mortgages applied consistently over the long term would help avoid some of the price excesses. I can remember the cap being three times salary, not four or five, and I also remember the interest rate being 13%.

    But overall as Mr. Carney pointed out we just need to build more houses. I can’t imagine any scenario on EU membership or border control that will change this basic conclusion.

  8. Iain Gill
    Posted July 9, 2014 at 7:09 am | Permalink

    A lot of the negatives of renting are not universal round the world, rather they are a product of the way the housing system is setup here.
    Not being able to decorate your new baby’s room in baby colours is pretty unique to the British short term tenancy system.
    Risking getting kicked out every six months (with no real notice since it’s always given but rarely enforced) mid your child’s academic year doesn’t help anyone in this country, landlords included.
    Lots of countries, like Germany, you can invest in your rental home because it’s a very long tenancy and worth your while, and the landlords are happy with such improvements.
    And for many people being flexible, and able to move geographically around the country is a better long term financial bet than being tied to the jobs market in one place, we need a proportion of the workforce to be mobile and therefore we will always need a rental sector.
    There is so much state manipulation of the housing market that you forget how much of it is going on its so embedded in all aspects of our life here.
    Disregarding house equity in benefits claims while anyone with equivalent savings in the bank will be denied access to the benefits system, just encourages people to keep their wealth in house equity. Discouraging savings in so many ways, and means testing benefits which should be contribution linked and disregard savings of any kind.
    The way school and GP catchment areas are tied to houses, is a massive manipulation of house prices. It is also one of the primary reasons large reputable companies will not enter the private rental market as they have no control over big downside risk of their houses being reallocated into a worse school catchment area which would be a massive devaluation, hence we have a private rental market dominated by small largely variable quality landlords.
    The way vast amounts of housing subsidy are given to councils and housing associations to sustain housing estates at subsidised rents has taken all the buying power away from individuals and allows the state to keep housing going in areas which would have been long abandoned had individuals been free to take their housing subsidy where ever they want. Massive negative impacts on the country from this. And none of the market dynamics we need, eg people moving away should reduce market rents and make it easier for new employers move to the area as potential workers will need less pay to cover the rent – the state keeping rents up acts against new employers moving to such areas.
    The way governments have repeatedly pulled the strings of the state to manipulate house prices ever higher. From interest rates, to help to buy, to restricting planning permission, to imposing large amounts of immigrants who need to live somewhere, and so on.
    The reality for me is house prices compared to similar locations in the world are massively overpriced. That is the real problem for generation rent. Governments have conditioned the people to believe house prices are a one way bet, and that they will always intervene to push them higher, hence it’s self-fulfilling because people will take silly gambles and overpay to get on the ladder.
    My own view is government manipulation of the market should be rolled away as much as possible. Keep giving needy people housing subsidy, but let them take it anywhere they want in the market. Get the state out of owning and running housing provision, including at arm’s length through housing associations. Facilitate long term tenancies for decent tenants. Radical cut back on immigration. Remove planning from council control, make it more efficient, and cheaper and quicker. Let house prices fall.
    With house prices at a similar level to broadly similar places elsewhere in the world there would be no “generation rent” problem, and the Ponzi scheme of government manipulated prices would disappear. That leaves you with the problem of those facing devaluation, well for many of them tough luck welcome to the real world, for others we could and should put in some kind of relief systems.
    I don’t think house prices are sustainable, even with massive ongoing government manipulation. The political class almost certainly plan to allow prices to crash at some point, probably after the next election. What we certainly don’t need is more fancy government schemes and financial instruments to get more people on the housing ladder, stop manipulating the market and prices would drop and then people will be able to afford.

    • Mark B
      Posted July 9, 2014 at 5:10 pm | Permalink

      A very thorough and informative post.

      Thank you.

    • stred
      Posted July 10, 2014 at 9:51 am | Permalink

      Long term tenancies for good tenants would be fine except for the demands of the Inland Revenue, who will require Inheritance tax to be paid before such tenancies terminate. By extending the period for payment, where the money is tied up, this problem could be avoided. I am currently having to let property underoccupied by two students maximum because of the propsed changes by Labour and the current HMO licensing brought in by the coalition.

  9. Richard Jenkins
    Posted July 9, 2014 at 7:21 am | Permalink

    Fifth: we need to recognise that Professor Paul Cheshire is right: that the greenbelt myth is the driving force behind the problems with UK housing, There is so much talk about too much of the UK economy being based in London, and not much about why cities outside London are prevented from growing.

    The greenbelt is strangling cities like Birmingham, Manchester, Liverpool etc. Planned expansion into greenbelts would convert inaccessible and sometimes second rate agricultural land into housing and parkland – simultaneously providing housing and improving amenity.

    I recently attended a meeting with my local district council when an official explained the pressure to build in rural areas:”Birmingham need 80,000 houses, but they only have room for 50,000.” So instead of building on the outskirts of a city, with all the infrastructure and employment available, we build on the edge of rural villages. How can that make sense? Or we talk about “garden cities”. Translation: “we are going to build on some green fields in the middle of nowhere and hope that employment just emerges there”.

    I am not a great fan of Evan Davis, but his recent TV programme “Mind the Gap [between London and other cities]” was right on the point – we need other UK cities to develop to counterbalance London. A sensible approach to greenbelt would be a vital element of that. Just as HS2 would absolutely NOT.

  10. JoolsB
    Posted July 9, 2014 at 7:40 am | Permalink

    England’s young, especially those in the south, have got absolutely no chance of owning their own homes in the future unless they have wealthy parents that is, thanks to the burden of debt this government have decided to impose on them, and them alone if they go to university. An EXTRA 9p in income tax plus interest for the next thirty years added to an already too high tax rate in order to enable a greedy, wasteful government to spend billions on international aid, the EU and the over bloated welfare system and public sector.

    Let’s face it John, this Government doesn’t give a toss about our young getting on the property ladder. Otherwise they would not have made Labour’s education apartheid three times greater, placing this extra tax burden on them and adding to the already difficult problem of our young being able to afford their own home in what is already the most expensive part of the UK to buy and for those in the south of England, forget it, they’ve got no chance.

    The only chance England’s young will have in the future is to make their homes abroad where property prices are cheaper and take their much needed skills with them to escape the crippling debt they will otherwise have hanging over them for most of their working lives if they stay in England. Nice one!

  11. Brian Tomkinson
    Posted July 9, 2014 at 7:59 am | Permalink

    JR: “First we need control of our own borders, with a measured approach to migration.”
    Not possible whilst we remain in the EU.

  12. Denis Cooper
    Posted July 9, 2014 at 7:59 am | Permalink

    Off-topic, JR, do you intend to speak in tomorrow’s Justice and Home Affairs Opt-outs debate about Theresa May’s plans to voluntarily give more powers to the EU even while David Cameron says that he wants powers back from the EU?

    Yes

    • Brian Tomkinson
      Posted July 9, 2014 at 1:37 pm | Permalink

      Reply to reply,
      Are you in favour or against giving powers back to the EU?

      Reply Of course not!

      • APL
        Posted July 9, 2014 at 4:09 pm | Permalink

        JR: “Of course not!”

        Do you think George Eustice will be speaking against Theresa May’s proposals?

        He was after all your candidate for the leader of the EUrosceptic wing of the Tory party not all that long ago.

        Reply I do not recollect there being any such post nor supporting Mr Eustice for it.

  13. Gina Dean
    Posted July 9, 2014 at 8:00 am | Permalink

    How about prefabs being built for social housing. Try to get the waiting lists down. Some built after the war are still in use. My aunt lived in one 2 bedrooms, built in fridge, which the average family never had. The government should not interfere in the housing market. Also I believe that they can’t keep up with the bricks needed now for building. So someone needs to think outside the box and quick.

    • Anonymous
      Posted July 9, 2014 at 2:45 pm | Permalink

      Yes. Great idea.

      Also allow annex flats to be rented out to relieve pressure on the rental market.

  14. Liz
    Posted July 9, 2014 at 8:07 am | Permalink

    Stop landlords having tax advantages over other house owners and make having a second homes less financially attractive.
    Build homes people want to live in – there are two many cheaply built poky flats built just for investors (advertised as such) and not for people to live in.
    Prevent foreign investors buying up, and leaving empty whole blocks of flats and houses by bringing in a residence qualification for buying property here as exists in many countries.
    Relaxation of the planning laws which have neither produced attractive housing nor in the quantity needed.
    Of course the main reason housing is in short short and expensive supply is the large numbers of immigrants coming here every year and we have no practical answer to that. We are already seeing people sleeping on the street in greater numbers and multi occupation of houses/flats and even sheds is commonplace.

    • bigneil
      Posted July 9, 2014 at 5:37 pm | Permalink

      “make having a second homes less financially attractive.” – -how would that affect certain MPs “flipping” their two homes for tax claims? – -would it stop them making £1m just for saying “sorry”?

  15. JoeSoap
    Posted July 9, 2014 at 8:11 am | Permalink

    Your ideas are contributory but not cardinal. It is prices that are the key problem, which are a consequence of the supply demand balance of money and houses. Too much money available at too low price on the back of QE, taxpayer help to buy subsidy, savers receiving interest rates below inflation. Houses lack supply in certain places through planning restrictions cost and awkwardness of building. We have recently built a “unit” and I would say after planning there are major issues with skills and control of building trades, also services where gas particularly work in an amazingly prima donna ish way to connect you or not at will, bearing in mind trenches need digging and filling before and after at normally £1000s cost.

  16. Iain Moore
    Posted July 9, 2014 at 8:26 am | Permalink

    “So how can we give more people the choice of owning and the chance of buying? 2

    You stop mass immigration. Simple!

    When you are adding to our population in the order of a city the size of Southampton every year, you don’t have to be a candidate of Mensa to figure out it would cause a housing crisis.

  17. Richard Jenkins
    Posted July 9, 2014 at 8:39 am | Permalink

    Stamp duty is an arbitrary transaction tax, hitting people only when they move house. The move may be from rented to owned, or it may be a move for reasons of employment, the latter only in some cases reimbursed by a new employer. Or it may be a cost imposed on older people wishing to downsize or move on retirement.

    Overall, a very bad tax, with no place in an ideal tax system.

    In the real world, however, successive governments have got us to the point where the revenue is essential.

    A reduction would be a good idea. But the first priority must be to rejig the system to remove the slab element – that is, the rate is applied to the total price, rather higher rates of tax being applied only to the incremental amount of price above the top limit of the lower rate.

    Even if the system were revised to be revenue neutral, but without slabs, that would be an improvement

  18. Posted July 9, 2014 at 9:08 am | Permalink

    Mainly what renters need to become home owners is cheaper houses. Instead all they get offered are ways to borrow more money and sustain greater debts.

    If interest rates were put back to a more normal 5% to 8% and the government stopped propping up house prices with schemes such as Help to Buy, Support for Mortgage Interest (SMI) and of course Housing Benefit then market forces would reduce house prices to an affordable level.

    Not having let in millions of immigrants would also have helped.

  19. acorn
    Posted July 9, 2014 at 9:10 am | Permalink

    A while back there was a study across the US that found a correlation between States where the rate at which home ownership was increasing and increasing unemployment in that State. The answer was home ownership causes a major mis-allocation of capital in the economy.

    Owner occupied expensive housing allocates capital to a non-productive asset. If that capital had been invested in productive enterprises, that employed people for long periods; made stuff that people wanted to buy, then unemployment would be lower and GDP higher.

    In the UK, more than most, there is a misplaced obsession with home ownership. This means that successive governments have to pander to home owners and not impose excessive taxation or stop middle class kids, inheriting large lumps of property wealth that they did nothing to create and invariably don’t deserve. Having the majority of your assets in one asset class, leaves you at high risk from price volatility as per the great recession of 2008.

    Looking back at the metrics, the current Help-to-Buy and the previous selling of Council Housing have been major economic mistakes; driven by an ideology that is well past its sell by date. But, you can’t teach old dogs new tricks.

    The UK workforce lacks mobility, selling a house is a pain and people avoid it; preferring to drive or otherwise commute than move. This all shows up in the UK’s less than dynamic economic stagnation.

    Reply So why then are the poorer areas in the UK the ones with the highest proportion of rented accommodation and the richest the ones with very high owner occupation?

    • Iain Gill
      Posted July 11, 2014 at 8:31 am | Permalink

      Re “So why then are the poorer areas in the UK the ones with the highest proportion of rented accommodation and the richest the ones with very high owner occupation?”
      Come on John private rental accommodation is almost all mixed up with owner (mortgaged to the hilt) occupied. So I doubt you can separate them, or even know which is which.
      Social housing estates have many and varied problems, mostly the result of the state and not the individuals living on them.
      Many have been left behind when the large employers they were built to support (mines, shipyards, steelworks, etc.) have shut and nothing replaced them, and the state almost forced the people left behind to stay there as the only way to cling onto their housing subsidy and a decent house. Over time the most able move away, and those left behind are a much larger proportion of those who are less able for one reason or another. Proper market forces would have allowed many of these estates to shut as individuals took decisions to take their housing subsidy elsewhere, but the state stops this happening not the individuals. Hence many are a result of state social engineering actively encouraging the least able to live in places with poor jobs market.
      Many of the big social housing estates have terrible local schools, there is only one way to break the cycle of each successive generation being raised in hopelessness and that is a radical improvement to those schools. In the old(not so long ago) days this didn’t matter as much because the local pit, or shipyard, etc, would take over responsibility for education of the output as they reached (a much younger) working age, and many went onto great things through this route of learning. Now that such dominant local employers are gone and the citizenry are left with the worst schools in Europe it’s pretty obvious what will and does happen, I don’t think this has anything to do with the relative merits of renting versus buying your accommodation.
      Social housing in otherwise affluent areas, such as the South East, has its own problems. Places like Milton Keynes had whole estates of the most troublesome residents moved from London when they were first opened, it’s hardly surprising the most troublesome families in London are still troublesome when put together in an estate in Milton Keynes.
      And so on.

  20. Posted July 9, 2014 at 9:16 am | Permalink

    The present stamp duty which increases in steps and you have to pay duty at the higher rate on the whole value is iniquitous. My daughter is trying to sell her house which is valued at a figure which is a little higher than one of the steps; it looks as if she will have to take a cut in price, as people have made offers, only to withdraw when they realise the extra duty costs. There is no other tax which escalates in such a manner.

  21. StevenL
    Posted July 9, 2014 at 9:31 am | Permalink

    Many Generation Renters can only afford to share rented premises with others

    And there you have it. If folk can’t afford to pay 4%-6% of the value of a home per annum in rent, they can’t afford to pay 4%-6% of the value of a house in mortgage interest either.

    The only way to change this would be to reverse all of the policies that have created the situation. That means bringing back the local rent officer, property taxes based on a percentage of land values, strict regulation on mortgage to income ratios and a plentiful supply of social housing available to rent.

    You go ahead Mr Redwood and advocate more tax breaks for incumbent landowners (stamp duty, CGT etc) – but you can’t fool all of the people all of the time and you certainly don’t fool me!

  22. Graham Elliott
    Posted July 9, 2014 at 10:20 am | Permalink

    Thought should be given to reducing or exempting SDLT on purchases which give rise to downsizing when households become ‘empty nests’. Many older people live in large dwellings and the costs of moving to smaller premises, thus releasing more capacity for those who actually need it, do not make it worth the move. Anything to cut the costs of such a move is helpful, particularly as people resent what can be regarded as punitive taxes. It would need to be carefully scoped so that it only applied in a genuine downsizing situation (not to be confused with moving to somewhere cheaper).

  23. behindthefrogs
    Posted July 9, 2014 at 10:41 am | Permalink

    I don’t agree with reducing stamp duty except at the bottom of the market. However it should be made smoothly progressive ironig out the large steps that currently occur. There is an argument for increasing stamp duty on larger properties thus putting pressure from the top on house prices.

    We need to reduce number of residential properties owned and rented out by foriegn individuals and companies. This would reduce the possibilities of tax avoidance.

  24. William Long
    Posted July 9, 2014 at 10:43 am | Permalink

    You are of course quite correct that there is a huge emotional plus to owning the roof above your head, but for a great many people the motivation to own has been increased exponentially by the perception, caused by years of house price inflation, that owning a home is a one way ticket to riches. That must be a major reason why people yearn to get on the ‘Housing ladder’. The result is the next generation being priced out of the market.
    The ultimate solution to an excess of demand over supply is to increase the latter and changes to planning regulations are a way to help. You could also remove the perceived great advantage of home ownership as an investment, and investment is for many what it has become, by making a home liable to CGT; this in my view would be much preferable to stamp duty as it is payable after sale, when there is liquidity, and not on purchase, when funds are inevitably short. If this was combined with the less penal CGT regime you propose it could have the merit of making people view other types of investment more favourably in relation to homes, and make some reduction in demand for them.

  25. Eddie Hill
    Posted July 9, 2014 at 10:58 am | Permalink

    As I said in my comment yesterday (which was moderated out of existence) in reply to your post: “Immigration, free movement and the better off” here is another clear exposition of a problem with the same root cause, but again with no recognition of this and no solutions being offered, which equals more agonising while the problem gets worse!

    Price is a function of supply and demand. Even if we discarded all planning regulation, and kept building until our country is covered entirely in concrete, we will never keep up with the insatiable demand that comes from uncontrolled global population growth and mass migration.

    This is exacerbated by the fact that immigrants take jobs from British people, so it can come as no real surprise to anyone that British people can’t afford to buy their own homes.

    Someone has commented above that, if they aren’t tinkered with, markets will sort themselves out, but with demand rising relentlessly and supply falling short by some margin every year, and the mortgage market being all over the place, house prices will always rise in the medium/ long term. A lack of confidence in the pensions and investment sectors merely make things worse.

    Uncontrolled global population growth must be reversed, or immigration must be halted. The alternatives are all dire.

    I hope this post is short, uncontentious and undemanding enough to make the cut.

  26. Richard1
    Posted July 9, 2014 at 11:03 am | Permalink

    The constraints on housing supply are the planning rules, CGT which discourages sales of second homes and stamp duty which impedes liquidity. As we see all over the economy, the more govt intervention and tax, the more distorted the market. The ones who really feel the effect of taxes and regulation on housing are Generation Rent.

    Generation Rent should take note and support policies which reduce the size of the state so govt doesn’t need so much tax, and they should reject politicians such as Ed Miliband, who constantly argue for more govt intervention to cure some supposed ill of the market – almost always such intervention just creates a worse problem.

  27. a-tracy
    Posted July 9, 2014 at 11:19 am | Permalink

    Improve private sector pensions instead of tax grabbing from them and reducing their attractiveness so that older generations stop buying housing on the first two rungs of the ladder out from the feet of the younger generation, in order to rent them back to them at extortionate rates that pay off the entire mortgage loan. Don’t allow buy to let mortgages on properties costing below £120,000 unless the renter gets half the equity.

  28. hkwoody
    Posted July 9, 2014 at 12:25 pm | Permalink

    The restrictive planning process is the root cause of housing shortages and subsequently high prices. Free up that process and the rest will mostly take care of itself.

    • benj
      Posted July 12, 2014 at 11:59 pm | Permalink

      We don’t have a housing shortage.

      http://johnredwoodsdiary.com/2014/07/09/generation-rent/#comment-530560

      We have an affordability crisis. This is cause because land rents are capitalised into the exchange value of freehold title.

      As land rents are not created or sustained by the freeholder (the are commonly created) this is an massive implicit State subsidy.

      This not only pushes up house prices, by causes inequality and huge dead weight loses.

      We wouldn’t need taxes on income and capital if lands rents were the main source of State revenue.

  29. BobE
    Posted July 9, 2014 at 12:26 pm | Permalink

    A friend is renting a home via a housing association. Every year the rent goes up by 5%. His pay has not gone up in the last 3 years. Renting is throwing money away. These so called affordable houses are matchbox’s without gardens. It all returns to the fact that England is full. Too many people.

  30. julian
    Posted July 9, 2014 at 12:30 pm | Permalink

    There is a lot you can do to create a bridge between modest incomes and 1st rung home ownership. A few examples…
    1. Let people build self-sufficient micro-homes on brown field sites and on the dead ground between tower blocks on sink estates – thus revitalising them with new homes, gardens and small scale cultivation.
    2. Use creative ides such as modified containers which are being successfully for student accommodation.
    3. Use Prefabricated homes which can be massed produced and sustainable wood kit houses from Norway.
    4. Let people build ‘green’ one room dwellings at the bottom of gardens without council intervention (e.g those ‘hobbit’ houses imaginative people build and are then forced to demolish.
    5. Protect pensions properly so that people don;t buy to let instead of buying a pension – the main reason for house price inflation.
    6. Build skyscrapers containing studio flats for new entrants and students.
    7. Focus on declining towns and cities in the north and encourage affordable homes in those places.

  31. Tom William
    Posted July 9, 2014 at 12:33 pm | Permalink

    Stamp Duty will never be abolished, it is a useful cash cow. But the present structure is totally illogical. It is as if, with income tax, all allowances stopped at a certain income and then all income was taxed at the highest possible level. At the lower price levels there is no doubt that it acts as a brake on moving, penalising those who have to move because of their work and those who need a bigger house because of children.

    All Chancellors are aware of this but, knowing people will still buy houses, they don’t give a damn. Why should the wish to buy a house be an opportunity for a rip-off?

  32. Roy Grainger
    Posted July 9, 2014 at 12:47 pm | Permalink

    “Second, if the government reduced Stamp Duties buying a home would be cheaper”

    No it wouldn’t, the price of the house itself would go up to compensate, prices reach the maximum level which buyers can afford irrespective of how that total price is made up – surprised a free-marketer like you would make that mistake.

    First thing to do in London is impose penal capital gains taxes (higher than for UK-owned second homes) and VAT on purchases for properties bought and sold by overseas-resident investors (or investors outside the EU if we must) – can’t see a single downside to that policy, can you ? New flats in my part of London are marketed and bought off-plan in Hong Kong because CTG is zero.

    • benj
      Posted July 13, 2014 at 12:03 am | Permalink

      Land has value but no cost of production=the purest form of monopoly that exists.

      Mr Redwood is a fake-Capitalist. Because he chooses to ignore this land monopoly black hole at the heart of our economy.

      He believes in the privatisation of land rents, and therefore the socialisation of private property.

  33. Bryan Coombe
    Posted July 9, 2014 at 1:46 pm | Permalink

    I agree with everything you say. Unfortunately with open borders you can never build enough homes, in fact all you do by lowering house prices is attract more immigrants as it becomes more a more attractive economic proposition so you could argue building more houses makes things worse not better.

    What a pity we have a government unwilling to control immigration.

    Regards Bryan

    • bigneil
      Posted July 9, 2014 at 5:51 pm | Permalink

      Agreed – -If we doubled the amount of houses in the country, say, in preparation for Turkey joining the EU, and 70 million decided to come for their “entitlement” our leaders have signed us up to handing out, can you imagine the roads, schools hospitals etc – all in total breakdown. Will the “keep on building ” brigade emigrate as the last piece of grass is covered in concrete?

  34. Edward2
    Posted July 9, 2014 at 1:53 pm | Permalink

    Allowing relatives to gift deposits to their younger family members and making these lifetime gifts exempt from inheritance tax would help.
    Its the size of deposit needed which is the difficulty rather than the size of the monthly mortgage payment which often is little different to the rent being paid.

    Restoring some form of mortgage interest tax relief would be good, but mainly we need more new homes to be built.

  35. ian
    Posted July 9, 2014 at 3:44 pm | Permalink

    Your lot have made they bed, now you have to lay in it. 2022

  36. waramess
    Posted July 9, 2014 at 4:13 pm | Permalink

    Another case of “not me Guv”

    The Blair Brown folly of following Greenspan with low interest rates is now pretty well documented and now the Tories are taking their turn.

    The state of the housing market has been directly caused by the policies of super low interest rates intended to ensure that house prices were held at the 2007 bubble levels.

    Now the vast sums of money being thrown at the market through government guarantees have resulted in, not only the inability of the average person to afford a house but, worse still, a complete change in the culture of home ownership in the UK.

    This government really has nothing at all to be proud of and blowing such an enormous bubble just to secure a second term in office is criminal.

    But then, this is now considered normal behavior by politicians-Never put Party before personal gain and never put country before Party.

    That you cannot fool all the people all the time would be adequately demonstrated by the exodus to UKIP.

  37. Malcolm Browne
    Posted July 9, 2014 at 6:14 pm | Permalink

    Many people have commented that uncontrolled immigration is a major cause of house price inflation in England, and I speak about England, not Scotland who are in a rather more fortunate position and will be mad to vote no in September. These people are 100% correct in identifying immigration as the major cause of high house prices, and it is also the root cause of many other ills that have befallen this country, such as road congestion, queues at doctor’s surgeries and in hospitals. One person said that ‘you lot have made your bed amd will now have to lie in it’. Unfortunately, we all have to lie in this same bed as well, except perhaps the toffs who made some of the poor decisions.

  38. Posted July 9, 2014 at 6:57 pm | Permalink

    Whenever politicians are talking about pressure on doctor waiting times, school places, housing shortages etc the elephant in the room is the increased population caused by historic immigration.

    For different reasons most mainstream political parties – and the BBC – will skirt around this large elephant (thankfully not this web site though).

    I understand that the main political parties see immigrants, past and future, as a constituency that must not be alienated. Quite right too.

    However, it is surely patronizing to assume that mentioning immigration will somehow offend settled immigrants (those who are not settled are less likely to be voters).

    The discussions I hear in parliament (e.g. today’s PMQs discussion about NHS waiting times) and on the BBC are surreal when the main issue is not mentioned.

    It is tantamount to dishonesty.

    Why should I vote for politicians who will not face facts?

    Why should I pay the licence fee for the BBC which colludes in this dishonesty?

    You ask what can be done? The answer is to make the BBC subscription only. Nothing serious can be done to tackle immigration while we have this constant propaganda.

  39. Trimperley
    Posted July 9, 2014 at 9:50 pm | Permalink

    Introduce Right to Buy for assured shorthold tenants for new tenancies started after 10th July 2014. If the property is mortgaged the purchaser takes the existing mortgage on subject to passing the lender’s affordability criteria etc.

    A lot of folks have inherited property and done buy to let or bought to do buy to let because the return on savings accounts are poor. Put up interest rates so savings are more attractive.

    Stop printing money which has inflated the price of houses. I question the worth of an Oxbridge PPE degree. Do they not teach that printing money causes inflation on that course or did they all fall asleep in that lecture?

  40. libertarian
    Posted July 9, 2014 at 11:00 pm | Permalink

    I think the government has done quite enough damage rigging markets and interfering.

    Here’s an idea, sort yourselves out first.

  41. libertarian
    Posted July 9, 2014 at 11:12 pm | Permalink

    There is plenty of affordable housing stock in the UK. Its just not in the most desirable places. Like most things in life yet recognised by a vanishingly small number of people its about evolution. Work, industries and housing are all subject to evolution. When I was in my early 20’s and looking to rent in London I was forced to rent in a far less salubrious area. It was all I could afford. Many years later the same place is now a highly fashionable suburb. Thats how progress happens. Move out to cheaper areas if you want to get on the housing ladder, it really is that simple. London house prices will soon come back into balance when key workers can no longer afford to live or commute there to work. Meanwhile outside of the South East and certain other key areas the rest of the UK has nothing like the housing costs that people get hung up about on this forum.

  42. John Hill & Co.
    Posted July 10, 2014 at 12:08 am | Permalink

    As well as reducing the rate of Capital Gains Tax, a taper to zero for assets held for (say) over 10 years would be welcome, otherwise CGT is a tax on inflation. As a quid pro quo, mortgage interest could be made non-deductible in calculating taxable profits from renting-out property. These two measures would swing the market away from buy-to-let and help owner-occupiers. Buy-to-let investors would have an incentive to exit the market, with the carrot of CGT changes and the stick of paying more income tax with non-deductible interest.

  43. Andy
    Posted July 10, 2014 at 8:39 am | Permalink

    Too much of our national income goes on housing, it must throttle growth elsewhere.

    What has driven the prices up is clearly the willingness of banks to lend money at ever increasing levels to buyers.

    House prices could be made affordable if, perhaps using a phased approach, the amount of money that banks were allowed to lend to an individual or couple was limited to the “traditional” 3 X Main wage + 1 X Second wage, with a 5% deposit.

    This would rapidly bring down prices and may leave many people with far less equity (or negative equity). For people in negative equity on a main home, perhaps some mechanism could be created to let them offset any losses against future tax.

    For those who have just ‘lost’ equity, or are in negative equity on second homes, it would just be tough luck. For banks whose ‘assets’ are now worth less than they thought, it would be tough luck as well.

    Combine the above with building some new towns in the SE (Expanding Milton Keynes perhaps)

  44. BobE
    Posted July 10, 2014 at 8:44 am | Permalink

    “I would appreciate your thoughts on what else could be done to assist.”

    Stop excessive EU immigration

  45. Lindsay McDougall
    Posted July 10, 2014 at 9:32 am | Permalink

    Re your four points:

    Control of our own borders. Agreed, with zero net migration after 2017.
    Stamp Duty. Get rid of it all together and introduce a low rate of VAT on all construction.
    Cutting CGT to an optimising rate. Agreed; why ever not?
    Affordable homes? No, subsidise people temporarily, with a cap of the subsidy, not properties long term.

    And fifth: Get interest rates up to realistic levels and stop all artificial support to high house prices. The long run ratio of average house price to average income is 4.0. It is currently 5.5. This will take some time to work.

  46. ian
    Posted July 10, 2014 at 12:08 pm | Permalink

    If no one going to get rid of slave tax”s john, then your all going for a ride. There”s more than one way to skin a cat as they say. It going to be a real thrill

  47. Bazman
    Posted July 11, 2014 at 6:39 pm | Permalink

    Get on your bikes and move up north to Barrow-in-Furness where there is many affordable homes or just stop whining. Middle classes are not entitled to live near their parents just because they are middle class. No Jobs? Find one and stop relying on the MCSS. A whole new world awaits of industry, green landscapes and the sea. BAE Systems is recruiting right now for all professions, trades and no doubt a few deadbeats of all classes. Grim up north is right, but where is not grim without a house or job? Pies, whippets flat caps and northerners? You think this is not true? Thats exactly how it is.

  48. sm
    Posted July 11, 2014 at 9:33 pm | Permalink

    The political inconvenience in an election year of managing the fallouts due to the excess in our money system which was designed to deliver exactly what has transpired!

    High house prices = debt = loan interest & taxes=bonus until it all goes pop and then taxpayers then bail it all out.

    Move to a full reserve banking model and allow prices to fall.

    Remove the ability of private banks to create credit for speculation in the housing market e.g. buy to let of existing properties or purchase of more than one property. In other word let real interest rates rise for speculative rentier activities and reduce the tax deduction of interest on current BTL properties over a period of years.

    Tax capital gains at income tax rates. No carried interest rorts.

    Reduce immigration.

    Legally split remain speculative banking activities out of retail banking for owner occupier mortgages.

    Consider retrospective seizure of all assets of the key directors & beneficiaries team of any bank requiring assistance. Yes its unfair & retrospective but it is the equivalent of confiscating wealth of the many by QE and money printing.

  49. Oscar De Ville
    Posted July 12, 2014 at 3:57 pm | Permalink

    You invited comment on the current housing “shortage”. Does this have to be seen as a crisis demanding government help ? Does the emphasis have to be on ownership by right rather than rental, on houses rather than appartments ?

    If you will kindly allow for the fact that we are almost always prisoners of our own experience, the following points may be of interest :-

    — Before WW2 most housing was mainly by rental ; certainly so in my fairly typical mining village There was commonly as much house-pride and care as in ownership, and certainly no disdain for those renting ; and owner exploitation or greed would soon have been exposed within what were real “communities”.

    — After the war much remained the same, with no expectancy or right to state help. For those of us returning from war service, and even after much delayed university achievement, house ownership was a distant target to be earned. (I recall that in my own case after seven years of marriage a mortgage was finally achieved only after persuading the vendor to act as guarantor for half the required 20 per cent deposit !). There was no sense of being deprived, and most people seemed happier than today, and certainly not expectant of state help.

    — It seems that in northern Europe, including Germany, reliance on renting is still present and honourable, thanks often to the widespread practice of having flat-dwellings on brownfield sites.

    — Although Mrs Thatcher gave great impetus in giving house ownership a timely boost, are we really sure that this Government’s concern to build yet more houses on greenfield sites is necessarily the right answer ? Is there nothing to learn from our own history and continental practice – or even from immigrant-ridden Australia ?

    — Can we not, without undue direct government intrusion, work towards a wholesome and flourishing rental market ?

  50. benj
    Posted July 12, 2014 at 11:41 pm | Permalink

    John Redwood says “Second, if the government reduced Stamp Duties buying a home would be cheaper, and more homes might come onto the market as people would be more willing to trade up or down.”

    The incidence of Stamp Duty falls on land values. This means it depresses selling prices by the amount it collects.

    Therefore getting rid of SDLT will only capitalise it into higher house prices. This means higher interest payment over 25 years. ie SDLT x 3.

    So housing will not become cheaper. New homeowners will end up paying far more in interest. And if the burden of SDLT is then shifting onto work and enterprise, housing becomes more unaffordable, as a ratio of discretionary income.

    That fact Mr Redwood appears not to know this, shows the very poor level of economic understanding by our MP’s.

    No wonder this Country is in a mess.

  51. Will
    Posted July 15, 2014 at 10:00 am | Permalink

    It might help if house prices were rooted in income to earnings ratios and not artificially low bond market yields. There are two ways to get on in life in this country – be a property speculator or inherit lots from your parents who in turn have probably won lots of money on the property casino themselves.

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
    Published and promoted by Thomas Puddy for John Redwood, both of 30 Rose Street Wokingham RG40 1XU
  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page