Are Labour's plans to tackle housing dangerous for the market?

According to a new report from property management company, Apropos, the latest report commissioned by the Labour party to resolve the UK’s housing problems would crash the housing market rather than resolve it.

Related topics:  Property
Warren Lewis
27th June 2019
Corbyn 710

Apropos by DJ Alexander believes that the report, entitled ‘Land for the many’, doesn’t understand the key issues affecting the UK property market and provides solutions which would only exacerbate the problems.

The report believes that land prices are at the heart of the current housing problems and that by taxing financial gains individuals make on their personal properties, this would re-align the prices in the market and make property more affordable to a wider number of people, reducing the requirement for a large private rented sector.

The report states that applying capital gains tax (CGT) on the sale of privately-owned homes would generate £28bn annually for the Government. This money could then be used to fund affordable house building, with the Labour party committing to build 100,000 new homes a year for the next ten years.

David Alexander, joint managing director of Apropos by DJ Alexander who has almost 40 years of experience in property management, said: “The current housing problem revolves around several key misconceptions about what has happened over the last decade.

Home ownership peaked in 2007 but we know this was based on loose lending and an overheated property market, resulting in a property correction in the following years.

However, to say that home ownership is at an all-time low is inaccurate. There are now 64% of the UK population who are owner occupiers which is lower than the 71% peak in 2007 but there are few who would wish a return to such a period of reckless lending.

Many who are unable to get a mortgage now would have been unable to get a mortgage 20 years ago. Comparing lending conditions now with 2007 is a mistake. Lending criteria has tightened, and this is beneficial to individuals and to the market, which despite what some believe does not welcome enormous peaks and troughs in values.”

Furthermore, pressure is being placed on the housing sector due to the increasing population caused by increased immigration, longer life expectancy, and a trend for more people living on their own (an increase of 21.1% over the last 20 years). The UK population rose to 66 million by 2017 and is forecast to increase to 73 million by 2041. This is a rise of 291,666 every year for the next 24 years so even building 100,000 new affordable homes per annum, which is ambitious, will not keep up with the projected rise in demand.”

David continued: “The private rented sector (PRS) has stepped in over the last two decades in order to meet growing demand which could not be fulfilled by a static and even shrinking social housing sector. Therefore, to place all the problems of the market on the PRS is to misrepresent and misunderstand why this sector has grown.”

There is welcome legislative change being considered to introduce greater protection for tenants. These have already been successfully implemented in Scotland, which will enhance the protection of tenants’ rights. Tax breaks for landlords are being phased out and lending to the PRS is, rightly, much more restricted and controlled. Therefore, a solution which seeks to eliminate the PRS and replace it with social and affordable housing seems to be based more on ideology than on practical effect. Indeed, the latest English Housing Survey states that overcrowding is a bigger issue in social housing than in the PRS.”

David concluded: “To remove any accumulated value that homeowners gain from their home through extending CGT in order to resolve the perceived issues within the PRS is simply wrong.

Any tax on homeowners’ capital gains will result in a collapse of engagement in home ownership (which we should remember accounts for two thirds of all voters), a reduction in lending from banks who will see loans as more insecure without increased capital growth to protect their investment, and simply states that wanting to grow your wealth in any way is viewed as a bad thing.

The truth is most people want to feel wealthier than the previous generation and home ownership has been one way in which many have achieved this ambition. This report seems destined to deflate the home market that has served generations well all for an ideological viewpoint and that is not helpful to renters or homeowners. What the housing market needs is greater cooperation between social housing, the PRS, lenders and government to create a society in which people can live in the home they want to live in.”

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