The Liberal Democrats need a better housing policy. The proposed policy on building many more houses that was (rightly) debated at Conference is not sufficient. The other policies in the Liberal Democrat manifesto had weaknesses.
The housing situation today is the cause of some of the biggest problems we have in delivering on fundamental Liberal Democrat principles of ‘the freedom, dignity and well-being of individuals’ and on the ‘just distribution of economic rewards’ – let alone getting ‘value for money’ for the state. Jeremy Corbyn has identified affordable housing as his first priority in his early statements and PMQ’s. However the housing situation is not just unsatisfactory for the far left and the poor: it is unsatisfactory for all (except maybe for the rich and the private landlords). We in the Liberal Democrats should be leading the search for agreed centre left policies to do something about it.
We need more houses but when we spend over £25 bn a year on housing benefit, £10 bn of it to private landlords, we need to say more clearly that there is a need for substantial new housing for social rent – for the benefit both of those who need the housing and the public purse. We also need policies which will reduce house prices and rents. Whilst these are so high they both tie up far too much wealth unproductively and create excessive, unjust differences between those who inherit deposits for houses and those who don’t.
We need a better deal for private tenants. Investors can and do put up with 1 year or more notice periods on bank accounts – they should have to do this if treating a person’s home as their investment. The basic minimum rental period should be at least 1 year.
Housing rents are too high. Rent controls are questionable, but we should try to find some way of limiting sudden increases.
We should ban letting agent fees for tenants as they have done in Scotland.
We should be making buy-to-let less attractive (so that the wealthy put their money in industrial investment rather than crowding out ‘own-home’ buyers and increasing prices) by stopping all mortgage tax relief on buy to let mortgages (as a side benefit increasing tax revenue by £6Bn or more)
Register all rented property to allow HMRC to maximise tax revenue.
Scrap the new Tory inheritance tax benefit for houses; scrap ‘help to buy’.
Review how tax policies, including Land Value Tax, can over time be used to reduce price levels – including by making better use of existing housing stock.
These are some ideas the Liberal Democrats can lead to resolve the housing crisis.
* Stewart Edge is chair of Waverley Liberal Democrats
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30 Comments
Some years ago we had a Housing policy which concentrated on the wider living environment. OK it didn’t then have the urgency that has built up over several more years of inadequate provision, but pretty comprehensive nonetheless. I was on the Policy Working Group, so was quite involved.
I don’t agree with every one of those ideas, but regarding encouraging “the wealthy [to] put their money in industrial investment rather than crowding out ‘own-home’ buyers and increasing prices” one policy that would help would be to stop Capital Gains Tax favouring Buy to Let over shares. CGT should (as dividend taxation does) reflect the fact that corporate profits have already been taxed through corporation tax. The upshot is that property – which obviously doesn’t face corporation tax – needs a higher CGT rate than shares.
(https://www.libdemvoice.org/opinion-70-44293.html)
Certainly just ‘build more’ is not all that is needed but it is a big part of the solution.
There needs to be more supply, some of that will come from an increase in the total stock, some will come from the better use of existing stock.
Abolish the current Green Belt that prioritises agricultural land round cities over other open space near to where people in the cities live. Better planning rules.
Removing Stamp duty on property wold help, we need people to move more locating to property better suited to their needs without there being a tax on this positive (for society) action. There needs to be more cultural change to make it more normal to move but I don’t see there is a plicy to achieve this.
A proper Land Value Tax would put incentives in the right direction. No review required, it creates better incentives.
A wider provision of rental housing. The current Housing Association market is odd some very large and some very small, this needs to be investigated what has driven this anomaly. Also more large private providers (institutional owners who rent on longer terms perhaps more suited to managing modern higher rise buildings in town and city centres). Stop attacking BtL it does serve a purpose and some are good and some bad, if it faced better competition (from better structured HAs and larger Private providers) the bad would be easier to drive out, but private provision services a purpose, I have relied on it.
“Scrap the new Tory inheritance tax benefit for houses; scrap ‘help to buy’.”
Absolutely.
“stopping all mortgage tax relief on buy to let mortgages (as a side benefit increasing tax revenue by £6Bn or more)” Terrible idea, there would be a collapse in the provision of the private rented sector (which many people rely on, and caters to those who need or want to be mobile).
“Register all rented property to allow HMRC to maximise tax revenue.”
A solution looking for a problem.
“The basic minimum rental period should be at least 1 year.”
Hmmm, how about “no-one shall be enslaved by […] conformity.” Just because you want lets of at least 1 year doesn’t mean everyone dies. There is a market in serviced apartments for a reason, my shortest let I ever took on was six weeks as I wanted to know if I liked the area (I didn’t, so I moved).
“because you want lets of at least 1 year doesn’t mean everyone dies.”
Should have read:
“doesn’t mean everyone does.”
Obviously everyone dies, eventually.
I don’t disagree, but while we won’t be in national government for a while, we will be in local government where planning happens and an ambitious housebuilding agenda can be realised.
I agree with most of these. My only issue with re-lowering the Inheritance Tax threshold is that in places like London a modest home can be worth as much as half a million (I know my home in Kingston is and it’s hardly a mansion). Of course, the lack of supply is a huge part of the reason houses like these are so expensive to buy. The most promising idea to accompany housebuilding would be a Land Value Tax.
Forgot to mention – I’ve just gone from sharing a student house with a useless shark of a landlord to sharing a much nicer one with a decent landlord. Anything we can do to penalise the former while rewarding the latter would be long-overdue and no doubt a votewinner.
It is one of the great oddities really. For years we were told that inflation was the greatest economic evil of our time – just that never seemed to apply to house price hyperinflation.
It is I think fair to say that there is more to housing policy than housebuilding. Do we have a crisis of building or a crisis of tenure? The stark reality is that when young workers are hosing 50% of their take-home into the pockets of the propertied classes there is a problem in this picture. No amount of fiddling will change it.
And this is before we get to Housing Benefit. Or Landlord Subsidy some might say.
Psi – ‘I have relied on it.’ By, ‘have,’ I take it you mean in the past? Surely the point is would you go and live in a BTL now, voluntarily? I don’t think anyone serious would say that BTL has absolutely no purpose or place. However when confronted with the choice of BTL rent, owner occupation or social housing, which – hand on heart – would you pick? I found BTL and the landlord classes about as appealing as vomit down the back of a radiator.
Conor,
Why do you think everyone should have the right to pass on a whole house worth £500k to their offspring without paying any tax on it? If each child is provided with enough to put down a deposit and use their income to pay a mortgage, should that not be enough? meanwhile at the very same time as raising the inheritance tax threshold for children whose parents die without a lengthy illness, the Tories effectively prevented children whose parents need lengthy care from inheriting anything…
Re. Help to buy: it is a policy that fuels the housing boom like many others but given that the no. 1 problem for most people is the deposit it seems quite a positive policy for getting new families onto the housing ladder rather than filling up all the rungs with people who own multiple houses, as happens when you favour buy-to-let…
AndrewMcC – “Why do you think everyone should have the right to pass on a whole house worth £500k to their offspring without paying any tax on it?”
Hmmm, opposite ends of the telescope i feel; why should we not have the ability to pass on property that we OWN?
And of course we should include the other factor that would help with the demand in the south (but only over the long term) which is sufficient infrastructure investment in the north to make it more attractive for businesses and therefore a destination to live in.
Combined with that we could shift all central government out of London, So start with Parliament (which would allow it to be refurbished then used for a different purpose), the central ministries, the central legal functions etc. up to near Manchester. That would free up space as the associated jobs relocated. Or perhaps that is too optimistic…
Psi – When you talk about, ‘the other,’ factor how about mentioning immigration too?
Amendment 3 at conference from Rugby raised the point that there is estimated to be enough brownfield land to provide a million homes .Brownfield comes in many forms from small back land sites, former employment sites ,abandoned property ,ex local authority depots, recovered land from industrial development the list goes on .This can also include existing council and housing association land where the existing housing is falling into decay, or is not fit for purpose for existing or future tenants .We really must kick start urban and rural regeneration schemes again .Stalled largely because of too much red tape by central government or interference like the right to buy housing association properties which removes the rental income from HAs that pays for new developments .
Tenants need homes they are not fussy about the landlord provided they act responsible and don’t overcharge.
Jedi
One should be able to pass on property which one owns – however, those that receive your largesse have not earned the gift and therefore should, in all fairness, pay a proportion of the value of it.
AndrewMcC, I’m not totally opposed to taxing inheritance but 40% is very steep. Jedi makes a valid point, but regardless there are better ways of taxing the inequalities of land ownership without digging into people’s pockets before their relatives’ bodies are cold. My point is that in places like London a small house costs a bomb so can we at least build some more houses and drop the prices before acting like a £500,000 house in the South is a stately home like it would’ve been when the tax was brought in?
There has been almost an acceptance of the situation in the Bath area. My Georgian flat was cold, mouldy with out dated storage heating. I had to move from my family into an area miles away. I don’t drive, am a pensioner getting used to the way I have to rely on buses.
We need homes, at least I have one.
The Prince was trying to build homes at Newton St. Loe, this was prevented by a few. This would have life changing for many!
The city of Bath has much student accommodation in progress, right in the centre of the city. They have bought the former police station. Quite a bit of property and land has become theirs.
Housing, is not a political football, its a need, a right, good housing helps all.
Less talking , more action.
“why should we not have the ability to pass on property that we OWN?”
It’s very odd that inheritance tax is levied on the estate. It would be far better if inheritance income was treated pretty much like any other income, and taxed under those rules. As inheritance is lumpy, it would probably be necessary to spread the taxable benefit over (say() 10 years. Initially 40% tax on the 90% +whatever is appropriate for the year of inheritance, then the tax gets repaid (or not) in line with the recipients income for each year. This would eliminate all the fancy tax planning around gifts, the 7 year rule, etc etc. If you’re lucky enough to inherit a million pounds, even if it is shaped like a house, no reason you shouldn’t pay tax on it.
@ A Social liberal – “those that receive your largesse have not earned the gift and therefore should, in all fairness, pay a proportion of the value of it.”
@ Jenny Barnes – ” If you’re lucky enough to inherit a million pounds, even if it is shaped like a house, no reason you shouldn’t pay tax on it.”
Again, a case of looking at things from the other end of the telescope.
What has the state done to earn the right to declare part-ownership of MY property?
I am not against the principle of inhertience tax (or redistribution generally), but I am not swayed by the principle of moral obligation to the state, and if it were up to me I would have the threshold be index linked to the price of housing:
0% – Up to 2x the value of the average household
25% – From 2x to 8x the value of the average household
50% – Beyond 8x the value of the average household
And never, ever, should a marginal tax rate exceed 50%, because the guiding principle of all gov’t activity must be to bring up the poor, not pull down the rich.
I was lucky enough to be selected to speak on this very topic at the conference this week.
I believe we have three separate and distinct housing crises:
Crisis 1 – supply and cost of homes:
Private homes to buy – we need to build more, and make sure that the infrastructure goes in as early as possibly, preferably first. This crisis is about house price increases.
Buy to let does not help this as it re-enforces houses as financial instruments rather than homes. And the Bank of England agrees.
Crisis 2 – Renting homes
For too long politicians have confused the need and right to a secure home, with wanting to buy a house.
Renting your home has to be revised so that it can be seen as a good option. Today it is financially disadvantageous, and we need to change that.
With a prevalence of 6 month tenancies, and the desire to keep the investment liquid, rental conditions need to be changed to provide secure homes.
But none of that is simply rent control – that is just too blunt. Buy to let doesn’t help here either as it gives us unexperienced landlords who probably should be investing elsewhere.
Crisis 3 – Social homes
We have to stop right to buy destroying housing associations and we have to get more homes built and retained as social homes.
Continuing the way we are going won’t fix these different crises. In fact it often isn’t even delivering the roads, schools, surgeries and community facilities needed to support the new houses.
” Investors can and do put up with 1 year or more notice periods on bank accounts – they should have to do this if treating a person’s home as their investment. The basic minimum rental period should be at least 1 year.”
As an Investor I have a choice of whether to ‘invest’ in an account that locks my money up for specified minimum periods, for example: no notice, one month, three month, 1 year, 3 years etc. Likewise I have a choice as to the underlying ‘investment’, for example: cash, stocks and shares etc.. So the analogy used and the cherry picking of a particular example of an account doesn’t stand up to scrutiny.
Also, the author overlooks what this will do to the market, namely there are only 1 year plus tenals available, if you want to only rent for a shorter period then you are going to have to pay penalties for early termination.
The author also overlooks the fact that until the first round of “right to buy”, it was normal to have longer-term rental agreements. However, one of legal things that came out of the “right to buy” was that having agreements longer than a year conferred residency rights with all that these then entailed. So immediately sensible landlords changed the term of their rental agreements to 11 months maximum with no extension; each agreement being freestanding and gave the tenant no accumulated residency benefits. Which to use the bank account analogy is totally in order as if I lock my money up for a year, I expect to be able to have ready access to it and not have the bank decide that it wished to keep hold of my money, because it suited them.
We need tax policy that makes it progressively harder to own more houses. In all major cities there are landlords that own significant proportions of housing stock, this ability to buy up neighbourhoods and then rent them out needs to be limited sharply. Here in Cornwall multiple home ownership has completely changed the local demographics over the last 15 years, destroying communities and driving local people out whilst the very richest holidaymakers annex our villages for all but 3 months of the year.
Houses have become pensions, this has to end if our youth are to have any hope of owning their own homes and if we’re to have a society that people feel a part of.
About twenty years ago when I was involved with housing there was general agreement that the private rented sector should be expanded because it was such a small part of the housing stock. The idea was that in this way people could find homes to rent in spite of the lack of investment in social housing which had resulted from Government economic policies that emphasised the need to keep the Public Borrowing Requirement as low as possible. Hence the various schemes to encourage people to invest in housing for rent. Unfortunately you cannot increase the private rented sector without having private landlords.
Of course the answer to most of our housing problems today is to build more homes. The shortfall in provision inevitably pushes up prices, which in turn pushes up rent which pushes up housing benefit bills but if you accept the need to keep the PBR as low as possible then how do you provide social housing which is desperately needed? In order to do this we must look at economic policies that are based on a different premise and these are long overdue. A simple return to Keynes is not the answer, as a party we must find a new guru and I do hope that the economists among us can do this.
This is a depressing debate – some say we must stop the rise in the number private landlords, I assume by taxing them out of the market. I am unhappy with this idea. If you tax the private landlord more, then rents will just increase to provide the money to pay the tax. Private landlords can get away with high rents and poor housing conditions because the supply of housing doesn’t meet demand.
There are about 2 million people in need of a home, there is demand for about 150-200,000 new homes a year for the net increase in population caused by immigration and there must be a demand for some new homes by young people moving out of their parent’s home – say 200,000 new homes a year.
To solve the problem by 2025 we need to build at least 450,000 new homes a year. And maybe as many as 500,000. If we do this and in 2026 still built 450,000 new homes there would be more supply than demand, house prices will fall making investment in homes less attractive, rents will fall making being a private landlord less attractive. Anything else just will not work.
With inheritance tax the question is how much inherited wealth creates too much inequality. If when I get to 50 or 60 I inherit part of my parent’s house does this make me grossing wealthy. I think not. If I inherit £250,000, or less depending on how many siblings I have, in another house have I become wealthy? I think not.
@Michael the whole point of the article, which I generally support, is that whilst house building is important, the unaffordability crisis in housing is to a great extend a financial situation and not simply driven by “supply and demand”. A lot of tosh is talked about demand for housing (e.g. terms like “pent up demand”) when the reality is that it simply comes down to price. Most of the people who would like to buy a home, if they could afford it, have a home already, it’s just that they are renting.
Much of the problem arises from artificially (but persisting) low interest rates, the ease of foreign investment, and the unattractiveness of most directly financial investments. But the financial and legal position of landlords in the UK is absurdly favourable – allowing mortgage interest to be tax deductible is an outrage that should have been abolished years ago, and it is welcome that even the Tories are finally and very slowly making moves to remove it. Tenants have next to no rights, and controls on both landlords and lettings agents need to be strengthened.
If letting became a lot more unattractive, to both domestic and foreign owners, then a lot of houses would come onto the market and prices would fall. The challenge is to get this sort of transition underway without it turning into a crisis, which in the current climate of economic fragility will be far from easy.
The financial situation for landlords
LJP
“I take it you mean in the past?”
Yes
“Surely the point is would you go and live in a BTL now, voluntarily? […] However when confronted with the choice of BTL rent, owner occupation or social housing, which – hand on heart – would you pick? I found BTL and the landlord classes about as appealing as vomit down the back of a radiator.”
Well my experience with BtL land lords was a mixed bag, the good , the bad and the bonkers. Though one of the worst exaserbating factors was when there was a bad agent. As to which I would pick. Given the choice, for living in for the long term I would pick owner occupier. However I think I will be renting from BtL in the future.
“I don’t think anyone serious would say that BTL has absolutely no purpose or place.”
The ‘private bad’ attitude on display so often in these discussions is very worrying. One aspect that is often overlooked is the benifits of a private provider with a bit more capacity like Germany.
German capacity is easier to understand when we look at a population of 81m that has been essentially static for the last 35 years will decline by 10m in another 35 years. the UK by contrast has gone 56m to 64m, and will grow to 72m in the same time-frame.
German capacity is even easier to understand when we consider in the particular case of the UK, we cram around 85% of the population into 66% of the landmass of great britain (a place called England), which gives a population density closer to Netherlands, rather than of a parity with Germany as a quick look might suggest.
@ Ian
“Most of the people who would like to buy a home, if they could afford it, have a home already, it’s just that they are renting.”
I don’t think this is true. Do you have any evidence? My figures include an annual increase in demand of 350-400,000 depending on the level of immigration and the 2 million people on the housing waiting lists. It does not include those living with their parents who would rather have a place of their own. I wonder how many of the 2 million are living in bed and breakfast.
I agree that the mortgage subsidy for rent to buy should be removed and private tenants given more rights and letting agents better regulated.
Jedi
Not sure if your referance was to me but my point was not about capacity in Germany but the models of provision.
Ian
Michael BG points out that you may want to cite a source for claims that there is no under capacity issue, there will be plenty of anecdotes pointing in the other direction so I assume you are looking at some comprehensive research?
“But the financial and legal position of landlords in the UK is absurdly favourable – allowing mortgage interest to be tax deductible is an outrage that should have been abolished years ago”
So if I step your logic on for businesses such as hotels, serviced appartment providers, or other accommodation provider they should all be excluded from including financing costs in generating the profit figure on which they pay tax? Which would be seperate from other businesses in the hospitality sector such as pubs and restaurants, could you explain why you favour this method?
@ Psi – cheers. i was replying to you, but seems we were talking about different things. 🙂