A new report from the Institute of Economic Affairs states that almost all of the Government’s interventions in the housing crisis have been “a step in the wrong direction”.
The paper, by Dr. Kristian Niemietz, particularly criticises the Help to Buy scheme, Inheritance Tax and tax changes for buy-to-let landlords.
Government’s Intervention in the Housing Crisis has Been “a Step in the Wrong Direction”
However, it believes that the Stamp Duty reforms of December 2014 have been a step in the right direction, but still criticises it for hindering those looking to downsize. It was recently reported that the majority of homebuyers have saved money under the new system.
The paper claims that the prohibition to build on the greenbelt is not just outdated, but conceptually wrong and should be abolished entirely.
The document especially criticises the forthcoming changes to landlord taxes, notably the reduction in buy-to-let mortgage interest tax relief. It says: “Letting a property is a business like any other and the cost of servicing the mortgage is a business cost like any other. Thus, the tax system should treat it as such.”
On the subject of the shortage of housing, the report states that not only is the UK’s stock inadequate, but it is mostly in the wrong place.
It adds that there is no specific shortage of social housing, private rental properties or first time buyer homes, but an overall shortage of affordable housing across all tenures.
It does not believe that boosting homeownership should be a policy aim in itself, but that the Government should strive to improve general affordability.
Dr. Niemietz’s report states that the housing crisis was caused by high costs of buying and renting.
It has found that both house prices and rents are among the highest in the world, both in absolute terms and in relation to average earnings.
Since 1970, house prices have risen by four and a half times after inflation, says the study.
It claims that no other OECD country has experienced price increases on this scale, or anywhere near the enormity seen in the UK.
OECD countries consist of the world’s wealthier states, including the USA and Canada.
The report also found that UK house building has sat at the lowest rate of construction than any other OECD country for over three decades. Earlier this week, it was claimed that UK housebuilders are restricting supply in order to keep house prices high.
Find the full report by Dr. Niemietz here: http://www.iea.org.uk/sites/default/files/publications/files/IEA%20Housing%20Crisis%20Briefing%20Feb%202016.pdf