A right-wing think tank has called for Right to Buy to be extended to private tenants.
Writing on the Civitas website, Peter Saunders says that giving private tenants the Right to Buy would help solve the housing crisis.
He suggests that private tenants would get exactly the same discounts as social tenants do when they exercise their right to buy – a 35% discount off the market value, up to £77,900 outside London and £103,900 in London.
While extending Right to Buy from the social rented sector into the private rented sector was proposed by Jeremy Corbyn in his leadership campaign last summer, this is the first time that support for the idea has been expressed by a right-wing organisation.
Saunders says: “This policy would not kill off the private rented sector, but it would trim back its growth.
“Prospective landlords (private as well as institutional) would in future be encouraged to buy new-build properties, for these would be immune from RTB for 25 years (ample time to make a decent return on the initial capital outlay).
“This would give a boost to new housing supply. But they would tend to steer clear of buying older properties, leaving more of the second-hand market to buyers who wish to live in the property.
“This should increase the availability of housing for prospective owner-occupiers to buy, and exert a downward pressure on prices.
“This downward pressure should in turn be reinforced by tenants who have exercised their RTB and who then trade up to take advantage of some of the discount they have been given (as commonly happens with those who buy their council houses).
“This will bring more properties on to the market at the lower end and should help push these prices down even further.”
Saunders says many under-40s have been shut out of home ownership by rising prices and the demand for huge deposits.
He also says the link between average house prices and average earnings has been broken.
After three house price booms since 1970, house prices soon fell back into line with earnings.
But between 2000 and 2014, average earnings rose by 51% and average house prices by 132%.
Saunders says most people believe the current boom has been caused by restricted supply, mainly the failure to build enough new homes.
But he says this is incorrect and that over the last 40 years, housing supply has increased faster than the growth in households.
Instead, he says: “The main causes of our problem have been on the demand side.
There has been a failure to “control the explosion of credit” which has contributed to “grossly inflated house prices”, while the low cost of credit has kept prices inflated.
Saunders concludes: “Recent government attempts to resolve the affordability problem by subsidising buyers have only thrown fuel on the flames.
“Help to Buy equity loans and mortgage guarantees have almost certainly pushed prices even higher, and new pension freedoms have channelled more new money into housing. Demand-side subsidies should be wound up as the first step to restoring affordability.
“Two other key proposals are advanced. The first is that the Bank of England should be given a statutory duty to regulate mortgage lending to keep the ratio of average house prices to average earnings within a specified range over the medium term. We must never again allow a house price boom to get out of control and go uncorrected as has happened since the late 1990s.
“Secondly, in order to rectify the existing generational inequality in access to home ownership, the Right to Buy which is currently enjoyed by tenants in the social rented sector should be extended to tenants of landlords in the private sector with discounts capped to prevent landlords incurring losses.
“This RTB should not apply to properties less than 25 years old, landlords should be partially compensated by capital gains tax concessions when they sell, and the standard duration of tenancies in the private sector should be extended to five years.”
Comments (8)
Build more social housing.
Simples.
My lord!
Is anyone else exasperated with the consent tweaks to housing, lobby groups and headline chasing MP’s are suggesting?
It really is quite simple, We have too many people for the properties we have here in the UK. To safely home everybody and stop the ridiculous rise is sale prices and rents there really is only one souloution. BUILD MORE HOUSES!!!!
We need far more social housing, more affordable homes and more towns / cities.
Yes i know once we build the land is gone but we have only built on 7% of land in the UK. Think of the jobs that will be created, the economy will boom.
Also you will not have households spending 3/4 of their household income on keeping a roof over their heads meaning we have a happier and more content population.
No amount of tweaking / taxing is going to sort the very real problem we have in that demand far out strips supply.
I am not a fan of finding problems with solutions but in this case Saunders does not have a solution. Merely a fantasy and the problems are many.
He must be the first person ever to claim that a lack of house building is not at the core of the UKs housing issues.
Demand is the problem apparently, not the supply.
If we stopped trying to buy the ****** things there would be no issues.
Genius.
So Civitas is a ‘Right Wing’ Think Tank? On the evidence of these cretinous observations by Peter Saunders, this is a bit like describing Margaret Thatcher as a Left Wing Socialist or Jeremy Corbyn as a Right Wing Free Marketeer.
It is true that attacking private landlords like this would indeed reduce demand for existing buy-to-let property and thus bring down prices, but then so would fining every new landlord £100,000 and taking away their children.
Interesting though, that Buy To Let Landlords have truly become the Bete Noir of our times – everybody wants to hit them. In the 17th century women with cats were also hunted down as witches. In fact I wrote an article on this trend in my blog a few months ago: http://www.landlordsandletting.co.uk/Blog/government-plans-for-future-buy-to-let-landlord-laws/
After you’ve finished foaming at the mouth, you might like to reflect on your learning that buy-to-let is progressively losing political support and draw your own conclusions about what that means for house prices and rents.
The article misses the paper’s claim that the housing market is a bubble feeding on itself with nowhere to go but down.
Apart from that, good summary.
So tenants will only be able to rent new builds, and not older properties? A lot of tenents like renting, it’s a choice, 9% of our tenants are also landlords. If they are effectively forced to buy, it makes moving harder in the future as buying has less flexibility that renting. Most tenants rent by choice. Buying or selling should be voluntary, landlords should not be forced to sell and tenants should not be forced to buy. This idea is a recipy for disaster!
here’s a disturbing thought if ” 9% of our tenants are also landlords.” is true across the UK then Mr Osborne is making it even harder for the population to move from area to area to find work if he takes tax relief away from interest on mortgages