Affecting Property Owners, Local Authorities, the Homeless

THE PROBLEM

In London today we have a strange paradox, rising house prices yet a shortage of houses to buy.

It seems the free market isn’t working. Supply is not meeting demand despite a rise in prices.

Existing home owners are getting wealthier without personal effort. In the last 5 years my house has earned more from just being there than I have from working hard.

Older, private property people and pensioners like me with under occupied large houses are blocking younger people, many with young children, getting onto the property ladder.

The Government is making it worse by subsidising buyers with cheaper mortgages, thereby further increasing London house prices and bringing about a major transfer of wealth that benefits banks and existing house owners, including landlords, and disadvantages aspiring achievers seeking somewhere to live.

There are many factors that have led to this problem, including those that distort a free market in housing, like planning regulations, the community charge, business rates, the rise in the number of empty properties, both in the private and public housing sectors and the commercial property market.

Most people in London, particularly the young disadvantaged, think this is wrong and something should be done.

THE SOLUTION

Increase the supply of housing rather than fuelling the demand.

How would I do this?

1 Stop subsidising house buyers, using Government money, to pay lower interest rates and provide cash for deposits.

2 Use the money saved to subsidise those who will be building new houses, who could then reduce prices and maintain profits, creating additional employment in the construction sector along the way.

3 Allow local authorities / the Mayor of London to levy a new “Excess Inflation Charge” (based on the difference between the sale price of the house this time and last time, (as recorded by the Land Registry) adjusted for general inflation, on all sales of existing domestic property (but not new build sold for the first time), from a certain future date (say January 1^st 2015), perhaps collected at the point of sale by estate agents/ solicitors and handed over to the local authority to spend on getting additional houses built.

This would be likely to reduce house prices in the medium term as the “excess profits” made on the sale would not go to the individual property owner but the “community” by way of the local authority.

It would also reduce the demand for loans / mortgages by those individuals and property companies (the new asset strippers) that buy, refurbish, resell at a higher price and pocket the profits.

4 Make more land available by relaxing planning regulations that restrict supply, such as that relating to the Green Belt and rules that restrict land use to non domestic housing.

5 Make more property available for conversion to domestic property use by reforming planning rules.

For example, if an existing property (shop, warehouse, factory, office building, catering establishment, school etc) remained empty and unused for more than 5 years, then the owners could be granted planning permission to convert the property to domestic use.

6 Tax the owners of domestic and other property on an upward rising scale that remains unoccupied and unused after 12 months with the tax going to the local authority for use in new house building or renovation.

Big problems need Big solutions to put things right.

Do you agree?