"With property transactions at an already low level, this sort of tampering could have unintended consequences."
The discussion paper, by IPPR researcher Grace Blakeley, outlines how the Treasury could introduce the mandate to allow affordability to improve. She points to the "self-reinforcing cycle in which increased levels of bank lending pushed up house prices, and high house prices allow consumers to borrow more against the rising value of their homes".
The IPPR likens the proposed target to the remit the Monetary Policy Committee has to control consumer price inflation.
After the initial five-year period, the IPPR believes house price inflation should then be increased to the same rate as the consumer price inflation target of 2% per year, meaning zero real-terms house price growth.
It believes the target could be implemented using macroprudential tools such as capital requirements, loan-to-value, and debt-to-income ratios.
Additionally, "since lending is not the only driver of house price inflation", the paper concludes that the government should accompany this target with active housing policies designed to increase housing supply and restrict overseas purchases of UK residential property.
The IPPR argues that the new house price inflation target set at zero "would help prevent another financial crisis and put the economy on a better track".
Mark Hayward, NAEA Propertymark chief executive, commented: “Excessive house price growth is certainly not something we want to see, but homebuyers make purchases on the basis of capital appreciation and the belief that their investment will be protected and enhanced.
"We encourage all measures to help first-time buyers get onto the housing ladder, but with property transactions at an already low level, this sort of tampering could have unintended consequences.”