Regarding the so-called UK housing crisis and “Levelling Up”, Prime Minister Johnson doesn’t have a clue.
Exhuming Thatcher’s Right to Buy scheme will be the same disaster it was when the policy was first enacted, the repercussions of which are still endured today. He is clutching at straws to save his skin by lazily reconstructing Conservative ideology into policies which are dangerous, divisive and unworkable. By its very nature, Housing is a long-term, (a very long-term) matter and as such knee-jerk measures and short-term fixes, such as he has presented, will not work.
The UK is an island or, more accurately, a group of islands, nevertheless space is at a premium especially when we need to begin setting aside large areas for agriculture to build food security. Not forgetting to also preserve our beautiful landscapes for the benefit of an exhausted population. In short, we, citizens of the UK, need to rapidly become more efficient and sensible with our land resources. And, we all must have a say in how it is managed.
*All my suggestions would be managed by a new Ministry for Housing with complete responsibility for just that, Housing.
So, what to do? Well, here are a few ideas on Buy to Let and Second Home ownership I have been kicking around for a while:
There are approximately 700,000 second homes in England (Government figures 2019) of which more than 50% are mortgaged. Most are rented out for income and eventual asset appreciation. It is worth pointing out that if a rental property is mortgaged, the landlord is not the actual landlord, the Lender is. Lenders are not subject to the same legal obligations as the immediate landlord.
1/ Disallow borrowing on any property other than a main residence. In other words, all rental properties including holiday lets and holiday homes must be cash purchases. This will potentially release 300,000 homes and stabilise communities.
2/ Disallow corporate ownership of residential rental and investment properties (other than non-profit charitable Housing Associations, Churches, Community projects etc. which must be registered as Community Housing with Local Authorities). All other rental property must be registered to a UK citizen by name. This will potentially release a further 50,000 homes.
3/ Properties which remain empty for 6 months or more will be subject to a Council Tax surcharge of 1/10th of the annualised average market value of the property. Properties remaining vacant for 12 months or more will be consigned to the Local Authority to relieve public housing demand.
4/ Reduce the 3% capital gains surcharge on second homes to 1% paid directly to Local Councils for community regeneration and social housing stock.
5/ Provide Local Councils with special powers to purchase excess rental stock on the open market with loans from Central Government Housing Ministry* (after the usual checks and balances).
6/ Abandon Right to Buy and Help to Buy schemes. Ridiculous measures that fuel community disharmony and aggressive price inflation. These measures do not address the basic problem of inflated values.
7/ Over a period of time (sliding scale towards a 10-year target), introduce a maximum household rental cap of 25% of average household income. All household members must be registered on rental agreements.
My first thoughts on primary Residential Home Purchase (Longer-term measures):
1/ Introduce maximum mortgage borrowing level on an annual sliding scale towards a 10-year target of 5x household income. All borrowers (close and blood relatives (i.e. children of any age who pay their parents some rent but not non-familial lodgers)) must be registered as beneficial owners at the Land Registry.
2/ Mortgage payments, which must include repayment and interest, to be reduced on a sliding scale towards a 10-year target of no more than 30% of average gross household income.
3/ Mortgages to be secured only against the property, not against any individual resident or owner. Mortgage companies will be encouraged to insure themselves against default with no recourse to the owners personally for premium payments or any costs other than the defaulted mortgage.
4/ Over a period of time (10 to 20 years) reduce mortgage terms from an average of 25 years at present to a maximum of 7 years.
Allow me to conclude by saying that I believe a home, whether rented or purchased, must be regarded as every citizen’s right. Where commercial markets fail to deliver this right, Government and Local Authorities must step in.
Comment below or write to me: email@example.com
© Rod McRiven 2017
Photo by: Various sources (DM me to take down)
Sources: World Economic Forum, Office of National Statistics, London School of Economics and others.