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Elliott Burton is a former Special Adviser in the Department for Business.

It was a recent article in the Evening Standard headlined ‘eight of ten homes in flagship schemes sold to overseas buyers’ that made me think we’ve reached the tipping point. I was reading that article on a train passing the huge Battersea Power Station and Nine Elms housing developments thinking; what is the point of all this redevelopment if the vast majority of these homes will never be bought by ordinary working Londoners?

And it’s no longer just a London problem. A recent investigation by The Times found that in one of Manchester’s biggest housing developments, 93 per cent of homes had been bought by foreign residents or companies registered overseas.

UK property prices have more than doubled since 2002 and a report by PWC found that young renters without help from the Bank of Mum and Dad may have to save for as long as 18 years until they have the deposit needed to buy their first home.

Ordinary working people are being priced out of buying a home of their own and we need radical new thinking if we’re going to fix this escalating crisis.

The government should introduce a new tax on overseas buyers of UK property. The tax would be a percentage levy on the final sale price of the home. It would apply to citizens and companies buying UK property who are not resident or registered in the UK. Last year Vancouver, whose housing market was facing similar conditions, introduced a 15 per cent levy on overseas buyers. The number of overseas buyers dropped dramatically and house prices fell.

Developers will no doubt say that without investment from these overseas buyers they won’t be able to build. But I struggle to buy that. We already know that domestic demand for housing is far outstripping supply. And we also know the UK population is growing and is set to reach 70 million in less than a decade. It’s simple economics, with an ever increasing demand that is not being matched by supply, developers can build and sell homes and make a profit. Sure, they may have to include fewer luxury apartments in their developments, but I’m not going to lose sleep over that.

Of course, not every overseas buyer is a wealthy investor and a rebate system would need to be worked out for people who have genuinely moved here to work and pay their taxes.

And I know simply taxing overseas buyers is not on its own a silver bullet to solve our housing problems. We need to build more houses.

So secondly, the government should expand its Home Building Fund and create a housing investment fund that invests directly in new developments. The fund could invest up to 50/50 with developers on new builds. For developers, the government shares up to 50 per cent of the risk and provides upfront investment and in return the government can set the pricing and get the cost of its investment returned on its share of the new homes. The fund could also buy public land and allow developers to build with stipulations on the pricing of homes and a time limit by which building has to start. It could also make loans to small housebuilders and provide funding to devolved bodies, such as the Greater Manchester Housing Fund.

In the long term, the fund should be fiscally neutral for the Treasury as the government recoups its investment through receipts on the sale of its share of homes. And having government guaranteed investment behind a development should also make it easier for developers to access the private finance they need to build more homes.

I have no doubt these proposals will have critics who will reason they cannot work. But I believe with a little bit of political will they could be made to work and its the right thing to do to help those who work hard, graft, scrimp and save.

What is certain is that the time for piecemeal reform is long past and we need bold new policies if we’re going to once again make the dream of owning a home a reality for millions of working people.

54 comments for: Elliot Burton: The Government should introduce a new tax on overseas buyers of UK property

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