Some Christmas cheer from the Guardian

HAMISH_MCTAVISH

And as an aside Jason, you might be rather interested in this thread.....

https://forums.moneysavingexpert.com/discussion/4851098

Jason74

HAMISH_MCTAVISH wrote: »

We'll agree to disagree there.

Thanks for another well reasoned response. Again, I agree with much of the post, while disagreeing with a couple of key aspects (mainly in the sense that part of "my" solution would be a much tighter regulation of the rental market, including rent controls, backed up with enforcement that would see serious breaches treated as a serious crime dealt with by significant jail sentences).

However, it's probably fair to say that we will never agree on this one, so probably best we leave it there to avoid hijacking the thread. Thanks for the good debating :beer:

Jason74

HAMISH_MCTAVISH wrote: »

And as an aside Jason, you might be rather interested in this thread.....

https://forums.moneysavingexpert.com/discussion/4851098

Indeed. Naturally I voted for more housing. Like I say, we're in agreement on that much at least

HAMISH_MCTAVISH

Jason74 wrote: »

Thanks for another well reasoned response.

No problem...

Any time.

CLAPTON

Jason74 wrote: »

Much of this is true up to a point, although actually what you've done is summed up exactly why housing is just like food and energy in many respects. Housing meets the basic human need for shelter, food meets the obvious need not to starve, and energy meets the need for people to have access to heat, light etc. In all three cases, many people in practice consume in a way that satisfies a "want", rather than just a "need" (while some others do not have enough to meet basic requirements). You provided good examples for this both with food and housing, and the same is also true of energy.

The fact remains however that all of those three things ultimately satisfy basic human needs in the way that most other "assets" do not. My point is essentially that we would as a society be better off if people saw housing primarily as a way of meeting that need (or if you prefer, for the utility value of the "want" element), rather than as a means of accumulating financial wealth.

I am curious why you see the 'want' of a couple (with no children) to live in a 4/5 bed house with large garden or the 'want' of a student to go away to Uni and live in a BTL property or the 'want' of people to eat avocados as being virtuous and makes for a 'better' society
but for some-one to provide for their pension by buying a BTL that provides accommodation for that student is making a poorer society.

Jason74

CLAPTON wrote: »

I am curious why you see the 'want' of a couple (with no children) to live in a 4/5 bed house with large garden or the 'want' of a student to go away to Uni and live in a BTL property or the 'want' of people to eat avocados as being virtuous and makes for a 'better' society
but for some-one to provide for their pension by buying a BTL that provides accommodation for that student is making a poorer society.

It's pretty simple really, but I'll take them in turn anyway.

1) I'm not sure that the want of a childless couple to live in a 4-5 bed house makes for a "better society". Indeed, I think that such an approach is probably unhelpful. It is of course an extreme example though, and a classic case of "hard cases make bad law". Very few owner occupiers under-occupy their property to quite that extent, although given the housing issue the country faces, looking at that through the tax system may eventually be needed.

2) The student going away for an education is likely to come back better educated, better qualified, and better able to make a contribution to society than if he or she had not done so. Those skills make for a better society, or at least have the potential to do so. Where courses can't demonstrate how they do that, then they probably should not receive taxpayer support.

3) I don't think that people's "want" to eat Avocados is particularly virtuous, or otherwise. I also don't think people eating avocados (or not) is terribly relevant to a debate about UK house prices. On a wider level, there is of course the legitimate debate about whether the relatively recent trend of transporting food all over the world to satisfy people's wants in this area is desirable or sustainable, but that's another discussion

4) As for the BTL providing a pension, well in the case of the student, I would personally rather see the University facilitating that housing, thereby resulting in either lower costs for students, or profits being ploughed back into education. For other BTL (which is the bulk of it to be fair), I am firmly of the view that BTL is generally a socially undesirable activity, because of the way in which it reduces the stock of properties available for home ownership.

That's not to say that there isn't a need for rental property too, there clearly is. But housing need is very much secondary in the BTL process to the desire of landlords to make profit. Shelter (who are as good a source as any) recently did a survey that suggested that private renting is the preferred tenure of only around 20% of those who use it. That suggests that many people are forced into private renting due to lack of alternatives. Reducing BTL would free up properties to enable at least some of those households to move into ownership. Building more social housing would of course help too.

The BTL investor has many other options to provide for their pension, while the potential householder has only two choices, buying or renting. Buying is the better choice for most, and BTL makes that harder to achieve. Therefore the tax system should discourage BTL, leading the money currently used for that purpose to be invested elsewhere (where it may well be more productive), and owner occupancy rates to increase as less homes are tied up in BTL. Form the perspective of a healthy society, it's positive outcomes all round :T:T:T

HAMISH_MCTAVISH

Jason74 wrote: »

For other BTL (which is the bulk of it to be fair), I am firmly of the view that BTL is generally a socially undesirable activity, because of the way in which it reduces the stock of properties available for home ownership.

That's not to say that there isn't a need for rental property too, there clearly is. But housing need is very much secondary in the BTL process to the desire of landlords to make profit. Shelter (who are as good a source as any) recently did a survey that suggested that private renting is the preferred tenure of only around 20% of those who use it. That suggests that many people are forced into private renting due to lack of alternatives. Reducing BTL would free up properties to enable at least some of those households to move into ownership. Building more social housing would of course help too.

I think you're somewhat missing the point.

The primary cause of high house prices is a shortage of housing.

The primary cause of the shortage of housing is planning restrictions and a lack of mortgage/development finance.

The best way to solve the housing crisis is therefore to build many more houses, through repairing the broken financial markets, and massively loosening planning regulations.

As this will also will have the secondary effect of making BTL less profitable, and making buying for O/O easier and cheaper, then market-distorting regulations and their unintended consequences will not be required.

If you seriously think the best way to build 3,000,000 houses in the next 10 years is to meddle with the tax system to punish a section of existing property owners, you're being extremely naive in my opinion.

Such distortions are likely to be immensely counterproductive and be subject to some rather nasty unintended consequences.

Generali

The solution seems pretty simple: there are lots of people that want to buy and lots of people that want to build. What's wrong with letting them do that?

Yet it's been Government policy since 1948 to stop builders building where people want to buy: on the edge of London. That ended 100 years of highly successful suburban development of London.

The old model was to extend infrastructure (railways or underground) for a profit and to build houses around that infrastructure to sell for a profit. It worked extremely well until the extremist Atlee Government decided to prevent further building around major cities in the UK.

As always, Central Planning wrecked a sensible and practical solution put in place by people acting in a free market.

Loughton_Monkey

Jason74 wrote: »

I am firmly of the view that BTL is generally a socially undesirable activity, because of the way in which it reduces the stock of properties available for home ownership.

That's not to say that there isn't a need for rental property too, there clearly is. But housing need is very much secondary in the BTL process to the desire of landlords to make profit. Shelter (who are as good a source as any) recently did a survey that suggested that private renting is the preferred tenure of only around 20% of those who use it. That suggests that many people are forced into private renting due to lack of alternatives. Reducing BTL would free up properties to enable at least some of those households to move into ownership. Building more social housing would of course help too.

The BTL investor has many other options to provide for their pension, while the potential householder has only two choices, buying or renting. Buying is the better choice for most, and BTL makes that harder to achieve. Therefore the tax system should discourage BTL, leading the money currently used for that purpose to be invested elsewhere (where it may well be more productive), and owner occupancy rates to increase as less homes are tied up in BTL. Form the perspective of a healthy society, it's positive outcomes all round

Like Hamish, I cannot let this go.....

BTL is "socially undesirable"?. Absolutely not. Landlords come in all shapes and sizes, from one-man-bands to 20-house 'property developers' to Private Companies who buy residential property. Every company and person surely has the right to buy and rent out a house just the same as they have the right to enter the car-hire business. People want to rent cars and houses so why not let them? Even our friend from Devon 'applauded' the move by Legal & General to enter the private housing market as an "investment" home for their funds.

What's the alternative? The only one I can think of is the Government to build all homes that are to be rented. One supplier. A monopoly! Is that good? Lenin & Mao may have applauded that idea, but I don't.

I anticipate that you may counter with the argument that it should be Housing Associations (or similar) who do it on the government's behalf. If that's the case, why should they? Where's the motive, unless they can make a profit out of it? If they can make a profit, then why can't a person or a small private company?

Unless, of course, you are considering that the taxpayer subsidise all rented property. Phew! No thanks. Housing Benefit is currently bankrupting us. Housing Associations are subsidised one way or the other by the tax payer.

When I went to work abroad for 6 years, under your scheme, I would presumably be banned from renting it out (which I did) and forced just to leave it empty - to be preyed on by sqatters, vandals, and thieves - or should I have boarded up the windows, drained the water system, and hope that it doesn't get infested by rats?

Also, I note a very woolly debate about assets. Of course it is an asset. You would have to live on the moon not to realise that. Every house (asset) is owned by someone. If a Local Authority, or a business, then look in their balance sheet and you will find considerable "assets" in the form of houses.

Every single house in the country is an asset. Many houses have been owned by councils and rented out and owner occupied and privately owned and rented out and unoccupied all within its life of 50 years or whatever. Its value fluctuated [broadly speaking] with the market irrespective of who owned it.

As has been stated, works of art, jewellery, and vintage cars can also be assets. Even a normal car is an "asset" in my book, albeit a depreciating one. It has a value for at least 20 years, usually. I used to rent my television in the 70's [couldn't afford to buy]. Ultimately I saved up and bought one because I figured the cost was an 'investment' as opposed to the renting alternative. Exactly the same with a house. I started off married life in a 1-bed rented flat, being the top floor of an old house converted to 5 seperate bed-sits. All I could afford.

I saved up and shortly 'invested' in a house for the prime reason that I resented paying money to someone else to rent it (just like the television). Since then I've moved 8 times and always owned.

Had I not earned as much as I did, I would not have been able to buy. So I would have rented. Why should I have been subsidised? If you agree I shouldn't, then the question is why should someone let me rent his house at "cost price" and not make a profit from it? We only get things at "cost price" when they are supplied by government. E.g. Healthcare, Education, or use of roads. And we all know how financially inefficient these are!

If you can't afford a house, rent one.

If you can't afford your own transport, then catch a train, bus, or rent a car.

If you can't afford jewellery, then rent it.

If you can't afford the rent, then government will subsidise you. If you earn enough not to be subsidised and still can't afford a house, then tough! You probably can't afford much jewellery either. Nor can I.

If cars can't be sold at cost price plus a tiny profit, then nobody will make them. If jewellery cannot be sold for cost price plus a tiny profit, then nobody will make any. If houses cannot be sold for cost price plus a tiny profit then nobody will build them. The usual laws of supply and demand will dictate the amount of profit.

Jason74

Again Loughton, much of what you say is true. My issue is simply that given the housing shortage we have, private individuals should not be able to hold houses for profit, locking other people out of home ownership. And the one thing that there can be no doubt about, is that BTL does make it harder for first timer buyers to get on the ladder. Hamish is quite right when he says it's not the primary issue, but it is an issue nonetheless. It is no co-incidence that home ownership started to fall for the first time in decades at about the time that BTL became widespread, and now continues to do so.

I acknowledge all of the disadvantages you raise with curbing BTL, but I am very much of the view that the current problem is such that it is worth putting up with those disadvantages in order to address the problem of first time buyers being priced out of home ownership by people who have already benefited from home ownership, and then being compelled to rent from those very same people. The inequalities that are being stored up from that process are socially undesirable in the extreme.

There are of course ways to address some of these issues that are something between a total discouragement of BTL through the tax system, and the current free for all. You could for examplehave more favourable treatment of BTL purchase of new builds, thereby ensuring that any money used for property investment directly contributes to increased supply (this also stops current "FTB" properties being choked off by BTL. You could have a rule that enables people to rent out their principal residence for a spell without tax penalties if they are going to be working away and do not own any other UK property , in order to address the very real issue you raise about mobility. These are just two examples. But it's clear to me that while much of what you say is right, allowing BTL to continue to grow uninhibited is that absolute worst possible option.