The Guardian noted in a blog yesterday that:
Rents across the UK are rising at the fastest pace since 2008 as strong demand outstrips supply, according the property website Zoopla.
Private sector rents in September were 4.6% higher than a year earlier at £968 a month on average, marking the strongest growth in 13 years, Zoopla found.
There were variances of course. In southwest England the rate was 9% per annum. In Scotland the rate was 2.7%. The issue is not this variance though. It is the trend.
As I noted very recently, two-thirds of the world's national financial wealth is invested in land. Since 2000 that notional value has increased threefold.
Rent increases are the inevitable consequence of this inflation in property prices that has in turn been funded by debt. The rent increases are required to service that debt. In other words, those who cannot afford to buy their own houses are now funding the increase in wealth of others who can. What is more, the tax system still subsidises this upward transfer of wealth by subsidising the cost of the debt.
What can be done about this? A number of obvious things.
First, income from rents have to lose their tax subsidy and be taxed at rates equivalent to work, whether received by an individual or a company that they own. Subsidies for housing should not go to landlords, but to occupiers.
Second, the still massively generous capital gains tax reliefs on rental properties have to end. They cannot be justified.
Third, if this is not enough to deflate house price increases there is still the urgent need to create more social housing, whether new or bought second hand from the property market.
We have to get this right. People's need for a home cannot be exploited to inflate global nominal wealth when there are simultaneously so many other issues to deal with.
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The acid test of housing policy solutions is how they will affect supply and demand, which is ultimately driving prices up.
Demand is largely demographic. UK population is still growing slowly as we are all living longer. Trends towards smaller households and single occupancy also add to demand, but are to some degree price elastic (more young adults will live at home or share houses if they can’t afford to live on their own). The main “demand” that can be influenced is purchase of property for speculative investment purposes which pushes up prices. Restrictions/taxation of non-UK residents and corporations owning residential property could help limit this pressure.
Changing the taxation of residential private landlords must be balanced to avoid penalising those who convert or build new properties, as this could further restrict supply. However, the most effective solution to increase supply is a massive social housebuilding program to lift supply at the affordable end of the market. This requires fundamental changes in government policy. This might include rent to buy arrangements, allowing tenants to either purchase their home, or build equity over time which could be transferred to another property.
As a footnote we also need designs for a green future that include
1) Passiv Haus levels of insulation
2).Higher housing density with better public transport links for a future without personal cars
3) More localised green spaces, shops, schools and services to make a car-less community more practical
Large scale social housing projects are the ideal opportunity to put these new designs into practice.
Well, I’d say it’s worse than you think – there is a relationship between private and social housing rents that is also causing problems.
Currently where I work, our council housing rents are 80% of market rent – something sanctioned I believe from 2010 and a 60% reduction in social housing grant rates for new development by Osbourne and Cameron.
We can still set lower rents – called ‘social rent’ more in line with local pay and conditions but these are now the exception not the rule. The 80% rule rules at the moment. But how else can we afford to develop without a rent hike to cover the business case and pay back the loan to the housing revenue account (HRA) in a reasonable time?
But what is happening is that people supposedly too poor to rent or buy are still actually paying more for their housing – as is the State through benefits payments through Universal Credit where the housing part of UC is being squeezed all of the time.
And the most sickening bit is the politicians who moan about the benefit bill being high when it is their deliberate macro underfunding of affordable new build that causes the problem!!!
You couldn’t make it up. Their approach is just not serious approach to the problem – like much of what they do.
Thanks
And agreed
Danny Dorling & Bob Cobnutt have both written about this.
I have an interest in ‘Land and Housing ‘ issues, my suggestions might be
1. As far as I can see the Land Registry isnt set up to identify multiple property owners, when I owned two houses (not by choice) there wasnt anything to identify this This should be changed.
2. We need to control who is allowed to own land and property in the UK & for what purpose. In particular I suggest that you should not be allowed to own residential property other than as the owners home. This includes second homes, empty properties, and ‘buy to let’ all of which would be subject to registration and planning consent.
3. All residential mortgages should be treated the same was so that purchase of second properties should not be treated as a business loan but as a personal loan and subject to affordability tests.
4. Mandatory limits on the multiple of earnings mortgage lenders can offer.
5. The Bank of England should be given a target of 0% house price inflation and a target ‘average house price’ of 4x earnings set
6. Bob Cobnutt has a lot of proposals about how to control the builders which I support and
7. Even the Government recognises that we cant build our way out of this
The LR is in dire need of reform
I would welcome change
After searching, I think you mean Bob Colenutt (not Cobnutt), author of “The Property Lobby: The Hidden Reality behind the Housing Crisis”…
Just to add that Osbourne removed the requirement for Councils to send their HRA surpluses back to central Government to be divided up usually between the southern LAs.
This meant that the surpluses could be used locally instead for reinvestment and the HRA became a stand-alone sort of business account with income and out goings for the housing service.
Prima facie it looks really good, but then Osbourne made LAs keep to below inflation rent rises for a number of year which then curbed any surpluses they made I think up to 2020 or thereabouts after we’d been allowed to keep them!!
Not only that, the Treasury I think then made LA’s add another percentage point on any internal loans made from the HRA for new build projects.
So as a result, our projections for income and therefore potential surpluses were well and truly messed up and this affected our in-house build programme plans we had as under the Tories we’ve lost record amounts of affordable homes to Right To Buy.
So on the one hand you have this seeming empowerment thing going on keeping our surpluses; on the other it’s just interference and obstruction with the way we are supposed to do it.
This to me typifies the Tories as they are now – they create a mantel of progressive sounding policy but gleefully (and I mean gleefully) undermine it with petty laser guided policy decisions that make things harder all of the time.
It’s like a game of snakes and ladders with them – giving and taking but mostly taking and smirking whilst they do it. It does rather jaundice you view of them as human beings.
The whole thing is designed to destroy public/council housing. Period.