UK's housing needs new foundations

penguine

However house prices may be moving, a new generation is signalling an end to Britain's passion for property

From yesterday's Observer -- a thoughtful article looking at the wider social issues surrounding our boom-and-bust housing market.

Research from the Chartered Institute of Housing out tomorrow will show that only a third of young people (18-to-24s) now aspire to own their own home. There has also been a big change in attitudes among the 25-to-34 age group; only 69% think home ownership is a good thing, down from 83% before the credit crunch struck.

CIH chief executive Sarah Webb says: "We've driven too many people into unsustainable owner-occupation and need to do a far better job of putting renting and owning on a level playing field. We need to get serious about the number of houses we are prepared to build and have to look at renting as a more attractive alternative to owning."

The underlying long-term picture is that there is a shortage of supply: and that means the pattern of high house prices and market booms and slumps will be hard to break.

Nickell says that the long-running shortage of housing that the British property market suffers has not gone away just because prices have slumped. "There is a shortage in the sense that not enough houses have been built to keep pace with the number of new households being formed," he adds. "And that has been the case since about 1998."

Britain's birth rate has been relatively strong, people are living longer and there is a steady flow of immigration, all of which puts upward pressure on demand. Britain is estimated to need nearly a quarter of a million new homes a year just to keep up. This year, though, experts expect fewer than 100,000 to be built - the smallest number since the second world war - as a result of the market slump.

Lack of housebuilding means Britain looks destined to live with relatively high house prices lurching from boom to bust as they have done for decades.

There are campaigners who argue that Britain should deal once and for all with its damaging boom-bust cycle in house prices by reaching for a radical policy known as annual land value tax (LVT), which would be levied on the value of land up to its maximum permitted development value.

The tax would be levied on property owners at, say, 1%, of the land's value every year, with the proceeds used to replace council tax and reduce income tax, thus rewarding work rather than property speculation. LVT would also encourage, for example, an elderly person living in a large family house to move to a flat and free the house for a family in a country where space is limited. It would also discourage developers from sitting on empty sites and buildings.

kennyboy66_2

The Land Value Tax is a great idea - provided it replaced council tax.

It has the advantage that, in general, the wealthy pay more, and it is pretty difficult to avoid & evade. Its should also be nice and simple.

It would also mean that non doms would pay say £200k on a Mayfair £20m house rather than the £8k (or whatever) they currently pay in council tax.

I think they have a similar tax in France (may be 0.5%).

Chris2685

According to http://www.whatprice.co.uk/financial/council-tax.html
The average council tax in 2006 was £1,234

The trouble with a 1% land value tax is that the average house price in the UK (according to http://news.bbc.co.uk/2/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm) is currently £224,064

This would mean people would be paying an average Land Value Tax of £2240.64!

If it was a 0.5% tax it could work I guess.

dopester

Research from the Chartered Institute of Housing out tomorrow will show that only a third of young people (18-to-24s) now aspire to own their own home.

Thanked if for that above. Claim of 2/3rds of 18-24s don't aspire to owning a home. Found the rest of the article to be weak. Shortage of supply arguments again, to justify high house prices.

So, house prices looking ever more unaffordable to that age-group... with fewer employment opportunities, much higher competition for jobs.

The housing bubble in many places now beginning to reveal the obsolescent model of economic life, with a work force "stuck in place" - anchored by houses.

Decaying towns from other economic eras, whose recent prosperity was built on "fictitious wealth" during the credit-bubble.

The smart will be those who remain mobile, and who can move to wherever the next job might be.... not owning a house with a huge mortgage, in some backward town, low-density sprawl.. where the local goverment isn't repairing roads and bridges.