Dr Rosalind Beck is a doctor of Criminology and a Conservative Party member in South Wales.
In the week before the party’s annual conference the Cabinet met to devise a housing policy to rival that of Labour. A particular focus was to be on increasing the number of first time buyers (FTBs).
The outcome of these discussions is that the Prime Minister has announced a further £10 billion for the Help to Buy (HTB) scheme, with an estimated 135,000 benefiting.
Whilst this is theoretically a good idea, the Government should look at the scheme with fresh eyes. HTB aids people to purchase new-build property – and some say it is the developers who do the best out of this as they inflate their prices. This can mean that the buyer is paying over the odds and even without a house price correction could initially be in negative equity.
The Government could assist as many as five times more purchasers if it allowed HTB for often far cheaper second-hand properties. This would give the FTB a more modest assistance with the deposit, get them on the housing ladder and protect them from paying an inflated price. Whilst purchasing second-hand doesn’t stimulate house-building, why should FTBs shoulder the burden of increasing supply?
In fact, the £10 billion fund will issue average loans of around £75,000; in many parts of this country – bearing in mind that 87% of the population does not live in Greater London – this would cover the whole cost of a decent two-bed property; begging the question: why is there this emphasis on getting FTBs to over-stretch themselves on their first property purchase?
It is a relief however that the Cabinet did not go down the previously predicted route of attacking foreign investors in London; there had been a highly misleading suggestion in the Guardian that foreigners were ‘snapping up’ properties which would have suited FTBs. These were in fact off-plan properties which would never have been built without ‘foreigners’ having stumped up the cash in the first place. In any case, the idea that attacking one group helps another is illogical and not worthy of a Conservative Government.
The Government now needs to broaden its focus and look at the whole range of possible measures; some could also be cost-neutral as taxing a group less encourages them to do more of the taxable activity.
As part of a constructive and Conservative package of policies on housing which would help FTBs, I suggest the following could be included:
- Optimising the use of current housing stock. With one estimate of 12.3 million homes having at least one spare bedroom, creative strategies for downsizing are needed (we need targeted property development to suit downsizers; not just greater numbers of flats for instance).
- Incentives for landlords who provide affordable, quality Houses of Multiple Occupation (HMOs) – greatly maximising use of current stock – enabling young people especially to live more cheaply than if they rented a whole house; a deposit can then be saved more easily.
- The outlawing of council tax re-banding of HMOs which leads to charging per room as well as unnecessary licensing schemes; these put upward pressure on rents.
- Raising the stamp duty threshold for FTBs; in 2016 around two thirds of FTB purchases were over £125,000 and thus did not benefit from an exemption which is ostensibly designed for them.
- The reintroduction of taper relief on capital gains tax (CGT) (abolished in 2008) for landlords who sell properties to owner occupiers (waiving and tapering CGT is common in other countries). If landlords were not penalised with huge CGT bills, this could greatly further the Government’s quest to increase the number of owner-occupiers in general. It is incredible that a Conservative Government seeking to increase the number of owner-occupiers hasn’t already implemented this.
- The immediate reversal of the punitive taxes, notably ‘Section 24,’ against landlords, which are forcing rents up and impacting negatively on young people’s ability to save a deposit, as well as exacerbating homelessness. The two largest landlord bodies are calling for the Chancellor to reverse Section 24 in the Autumn Budget.
- The demonstration through financial education and advertising initiatives that affordability is currently good, with house prices low in most areas, meaning large deposits aren’t always needed. Mortgage rates are also at an all-time low. First time buyers need to be given the confidence to know that they can buy. Indeed, the number of first time buyers has been rising consistently for the last decade.
- Government thinking out of the box; for example, enlisting the aid of high-profile people such as Martin Lewis, who is committed to improving financial education, to get young people to make the right choices in budgeting (so if one has an expensive wedding, that’s a choice one has made; instead of using the money for a deposit).
- Persuading people to live with parents for longer wherever possible in order to save. This was the way many people saved in the past. Moving out and renting too soon makes raising a deposit more difficult.
- Unnecessary regulations which prevent people from getting a mortgage when they can clearly afford it should also be scrapped where possible.
In sum, we all know that the number one policy objective in housing is to get more houses built, and all avenues to achieve this should be pursued. However, in the meantime, the Government needs to think constructively about what can be done with existing stock, must re-evaluate tax policy to support housing providers, tenants, and other would-be first time buyers and must focus on the entire country and all its citizens. It must not fall into Labour’s trap of calling for destructive and unconservative policies like rent controls or attacks on investors.