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Saturday, 17 April 2021

SQUEEZE THE EMPTIES: A FIX, PRO-TEM

 

THERE IS NO HOUSING SHORTAGE, NEVER HAS BEEN, ONLY TOO MUCH UNUSED PROPERTIES

Yes, it has always been the case that, overall, there is more than enough housing accommodation in the UK, even in England. True much of it is in poorer areas with few jobs. But even within reach of flourishing areas, there may be more houses than needed, certainly more rooms in houses than are strictly needed.

That shouldn’t be a problem. This is a free country. If you want two houses or two cars or three or four televisions, that’s your privilege. But over-housing and empty properties are a sign that a house is not just a consumer product, it is an asset, too.

The hated ‘Bedroom Tax’ was the Tories response to this situation. Naturally it only hit poorer people in social housing. What I’ll propose will not have that intentional evil aspect!

Who owns houses kept empty for speculation, or keeps on living in over-sized homes?

--BTL landlords hoarding because holding costs are trivial. Build new and the BTL landlords will grab a lot of it, especially London properties.

--Grannies in oversized family housing because they like the idea of leaving loads of money to their children. Can’t we get Granny to show more compassion for the young?

One sensible and practical fix, one pie-in-the-sky fix.

For the btl landlords – a practical fix

As David Renton in the Guardian 10Apr21 explained why BTL landlords are so rampant in the housing market.

For some time, it has been government policy to privilege the interests of private landlords over other homeowners. This process began in the mid-1990s when banks introduced buy-to-let mortgages, which assessed buyers’ creditworthiness on the rental yield from the property, rather than their existing income. Easy finance gave landlords an advantage over first-time buyers.

Buy-to-let landlords have also enjoyed tax relief: mortgage interest relief, and a wear-and-tear allowance. The tax breaks have diminished in comparison to what they once were, but the broad picture remains the same. Although the UK’s 2.5 million landlords are a small minority, because the market has been loaded in their favour, they were responsible for 18% of all residential property purchases by the end of 2019.

 The problem BTL causes

Apart from the obvious ‘crowding out’ of private home-buyers, because (as I explained in my previous blog link housescheaperbettermore.blogspot.com/2021/04/debunking-claim-that-house-prices-are.htm )

 Because housing has an asset-class, there is every incentive to hoard. Sure the extra income from rent is attractive, but it is a common observation that in boom times for house prices, your house can earn more than you (in capital appreciation)

The special fix for BTL

The 2.5 million landlords are neither popular, nor are they politically important. It is unlikely their advocates and protectors, the Tories, would interfere with their money grubbing schemes. But for all other political parties, landlords are any easy target. It’s not hard to identify who they are, because rent is income, and income means Income Tax.

The Fix: As before switching Stamp Duty to Land Value Tax is easy at point of sale, in the case of BTL even more so, and even less likely to cause street protests like the Poll Tax riots!

Even more helpfully, BTL already attracts much higher rates of SDLT, 3% extra  on top of ‘normal’ Stamp Duty since 2015. So it can kick in straight away for new BTL’s at more than double the 0.3% of Plot Value I suggested earlier.  (housescheaperbettermore.blogspot.com/2017/12/how-much-will-i-pay-cost-ofthe-mini-lvt.html)

So a starting Plot Value Charge rate of say 0.75% payable by the landlord is entirely practicable.

This can be retro-fitted to all previous rented property, with owners of multiples first in line. Annual uprating, the bugbear of many property tax systems would be far less contentious, politically.

Note: some private landlords are nice to their tenants, keeping rents low, helping when need arises. This applies especially when the landlord has a single tenancy, even more so when the landlord/lady lives in the same house. Sadly such benign tenancies may be swept away by these proposals.

FOR LINGERING GRANNIES – A pie-in-the-sky fix

The author of the Guardian article goes on to identify the other great category of housing-hoarders – the ‘lingering grannies’

Now let’s consider the situation for older homeowners who aren’t landlords. Hundreds of thousands of them save money in their 70s or beyond, long after retirement, not because they want to have an extravagant lifestyle but for the sake of the generations who come after them. If their plan is to help their children buy a house then rising house prices are of no benefit – it obliges them to save more, as ever more money is going to be needed to provide a deposit for their children’s first home.

For these people, the benefit of high house prices never materialises (they aren’t planning to sell their own home), but the cost to their family is only too real. It compels the younger members of their family to live in cramped housing, to have less money than they should, and to spend their days working excessive hours so that they have no time for older relatives.”

So appeal to the good nature of the grannies?

“What the left needs to do is to get people to see that the obstacle to housing justice is not individual home ownership…. [Do it] for the sake of individual homeowners who want the generation below to find a home of its own.  …. [Accept] a fall in house prices: a diminution of [your] capital and security in retirement.

Holy cow! There must surely be a better fix than appealing to good natures? How about tax-breaks for the over-housed elderly? How about Local Authority officials who can assist the move as a Social Service. Official because the old folk are (quite reasonably) suspicious of financial sharks and con-men.

 

Ref for this article

www.theguardian.com/commentisfree/2021/apr/10/landlord-power-homeowners-tenants-buy-to-let-property-labour

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