One politician simply frustrates but the other positively scares. I refer to Derek Mackay, finance minister in the Scottish Government and Jeremy Corbyn, leader of the Labour Party at Westminster.
The reason Mr Mackay frustrates is his continuing refusal to make amendments to Land and Buildings Transaction Tax, despite the evidence pointing to this boosting the number of housing transactions and leading to a net increase in government income from that source.
But in comparison to Mr Corbyn, he comes over almost as the property sector’s best pal. Now, this comment should not be inferred as an attack on the Labour Party per se. Over several decades Labour has, on balance, been no less homeowner-friendly than the Conservatives, despite the latter holding the mantle as guardians of a property-owning democracy.
Unfortunately, under Mr Corbyn, Labour’s longstanding commitment to moderate, social democratic policies seems to have lost its way, and this is no more apparent than in the housing plan compiled for the party by the left-wing journalist, George Monbiot. Rather than resolve the UK’s housing problems its consequence would be to crash the market.
The report believes land prices are at the heart of the current problems and that taxing financial gains individuals make on their “main or only” homes would re-align prices and make home-ownership more affordable and widely available. Applying capital gains tax (CGT) on the sale of privately-owned homes, the report says, would generate £28 billion annually which could fund “affordable” housing.
Home-ownership peaked in 2007 but we know this was based on loose lending and an overheated market, resulting in a price correction in the following years. However, to say that home-ownership is at an all-time low is inaccurate. Sure, the 64 per cent of the population who are owner-occupiers is lower than the 71 per cent peak in 2007 but there are few who would wish a return to such reckless lending. Many of those unable to get a mortgage now would have been in a similar position in the period before the crash. Comparing conditions with 2007 is a mistake because of how lending criteria has tightened.
Furthermore, pressure is being placed on the housing sector due to the increase in population caused by immigration, longer life expectancy, and a trend for living alone. The UK population rose to 66 million by 2017 and is forecast to increase to 73 million by 2041. This is a rise of 291,666 every year for the next 24 years, so even building 100,000 new affordable homes per annum – outlined in the Labour plan – will not meet the projected rise in demand.
The private rented sector (PRS) has, over the last two decades, managed to meet growing demand which could not be fulfilled by a static and even shrinking social housing sector. Therefore, to place all the problems of the market on the PRS is to misrepresent and misunderstand why this sector has grown.
Legislation similar to that which has given greater protection to tenants in Scotland looks set to be introduced in England. Tax breaks for landlords are being phased out and lending to the PRS is, rightly, much more restricted and controlled. Therefore, seeking to eliminate the PRS and replace it with social/affordable housing seems to be based more on ideology than practicalities. Indeed, the latest English Housing Survey states that overcrowding is a bigger issue in social housing than in the PRS.
Removing accumulated value from main-home residences through CGT will result in a collapse of engagement in owner-occupation, while reducing lending by banks who view capital growth as protecting their investment. Most people want the succeeding generation to be wealthier than themselves and home-ownership has been one way to achieve that. Sadly, this report implies that growing personal wealth is somehow a bad thing.
- David Alexander, MD of DJ Alexander.