Can the Government nudge us to be proud to rent? #housingwhitepaper

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Within an hour of the document’s publication, Paul Lewis had delivered his verdict and people were keen to endorse it. I was not one of them.

The UK housing market is too big a ship to be turned round by a big policy statement, in fact a big bomb of a policy would do it more harm than good. It’s got to be nudged into action using all the means at the Government’s disposal without losing the support of the Government’s voters. If your already in charge of managing BREXIT and an unruly America, just how many new fronts are you going to open up?

Yesterday I argued that we needed to concentrate on renting and detox our addiction to home ownership. To quote a comment to that blog

The commentaries on Radio 4 and elsewhere have all been predicated on ever rising house prices. This is in fact merely a post-war phenomenon.

It arises from an inadequate level of new house building, a growing population and smaller households. The removal of local authority construction represents a loss of around 120,000 houses a year.

It is compounded by the diversion of finance to bricks and mortar, rather than productive investment.

If we were to build say 400,000 a year (a dream as the capacity probably does not even reach 250,000) – over the life of a parliament, we would see house prices cease to rise and indeed in some locations decline.

The idea of a house as an investment, when it is clearly a depreciating asset (and certainly so in hedonic terms), is a nonsense. Driving up house prices has diverted ever more of our income into the provision of accommodation, and that makes no sense at all.


No silver bullet

That there is no big idea, is annoying. Selling off the council house stock was a great idea for a Conservative Government , short on popular affection in the early eighties. It kept house prices rising and though they shuddered in 1987 when MIRAS was removed, they’ve kept moving steadily upwards ever since.

But we are now exhausted. Houses cost too much for us to afford

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And home ownership is making the rich richer and the poor poorer.

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Renting doesn’t pay and owning pays too much. The Housing White Paper at least is clear about the problem.

It is also clear that to solve this problem, we will have to pour money into the rented sector (building to to rent) so that people will want to rent and not do anything to buy.


Time to scrap the tin-foil bullets?

Where I was disappointed with the White Paper was in the timidity with which it dealt with its recent failures. If we’ve identified the problem as an addiction to ownership, why are we feeding that addiction with a range of tax incentivised savings plans – all of which end in ISA? If the aim is to help those just getting by, why are we offering them “solutions” that they can neither afford or (in terms of tax) they will not benefit from? With savings accounts being tax-free, why should those on low wages be sold ISAs?


“Get on with it”

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We’re not getting on with it

 

What I liked about the White Paper, and where I disagree with Paul, is that the Paper – while recognising the problem, saw the solution as in resolve (getting on with it).

Those who think that you can decree 250,000 new homes to be built should read this article from the Evening Standard 14 years ago which reports the rubbishing of John Prescott’s attempts to build 200,000 new houses in the South East. http://www.standard.co.uk/news/prescotts-homes-plan-slammed-6352028.html

You’ll have noted that it was a Labour dominated Environment Committee that sunk the project. Yesterday the Labour party were fingering the Government for being “beyond feeble”. It is extremely easy to oppose the building of buy to rent, and extremely hard to build. As the graph above shows, it is all too easy to stall a housing project.housing-six

It is clear from the graph above, that there is space in London for more people to be housed. Brownfield is happening (witness the 4500 buy to rent flats going up in Wembley Park).

It is also clear that we are not making the best of our construction industry.housing-eight

It is also clear that since the financial crisis we have lost the small house builder and the innovation that small house builders bring.


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There needs to be a change of heart about house purchase

There is much that Government can do to reorganise the supply side of housing. But reorganising the buy-side (or more properly organising the rent side) is a lot more difficult.

What needs to happen, and this cannot be decreed in a white paper, is that we have a conversation about the affordability of housing and the desirability of universal home ownership.  The paper is distinctly cool on “right to buy” and rightly so. Where policy needs to move forward is not just in “right to rent” but in “proud to rent”.

 

 

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , , , , , , . Bookmark the permalink.

One Response to Can the Government nudge us to be proud to rent? #housingwhitepaper

  1. john mather says:

    The problem is the 1990 Housing Acts which need to be repealed It is the small builder that cannot deal with the beaurocracy the cost of entry being now too great and the impact on new starts clear for all to see.

    A common feature of the meaningless sound bites mascarading as thinking has the impact of removing innovation This is also true of the cull of the IFA community and the NHS the latest example being the failed integration of local authorities and NHS interface wasting just £5bn

    Like

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