How to help the young buy homes? Curb buy-to-let, says new thinktank
Estimated read time: 2 ½ minutes
If you’ve not heard of Onward (@ukonward), it is a new centre-right thinktank campaigning on “new ideas for the next generation”.
It warned the Conservatives will lose the next election because of the growth of “generation rent” – homeownership is out of reach for 2 million UK families. It called for intervention in the housing market and a stronger role for local councils.
“If you are young and growing up in Britain today, there is one thing you know for sure. That your chances of owning a home are fast becoming a pipe-dream,” director and co-founder Will Tanner (@Will_Tanner), a former adviser to Theresa May, said in a piece on conservativehome.com (@ConHome) this morning.
Here’s our guide to Onward’s solution to falling levels of home ownership and the reaction so far, including in The Sunday Telegraph, The Sun, Financial Times, The Times, The Guardian, The Independent, and City AM.
The problem: What did Onward’s own analysis reveal?
1. France has built roughly twice as many new homes each year as Britain since 1970. Some densely populated countries like the Netherlands built at an even faster rate.
2. From the 1960s to the early 1980s private renters spent on average around 10% of their income on rent in most of the country, and around 15% in London. Today they spend more than 30% and nearly 40% respectively.
3. Developers and landowners are benefiting most from the current system. Between 1950 and 2012, 74% of the increase in Britain’s housing costs was accounted for by increases in the cost of land.
4. The growth of buy-to-let has locked 2.2 million families out of ownership. If the ratio of privately rented to privately owned homes had remained the same between 2000-2015, and we had built the same number of homes, we would have ended up with 2.2 million more homes in owner-occupation.
Will also summarised Britain’s housing problem in a handy graphical thread over on his Twitter account.
The solution: What did Onward propose?
Neil O'Brien, previously an adviser to Prime Minister Theresa May and former Chancellor George Obsorne and now MP for Harborough, proposed rebalancing housing away from homes for a return and towards homes to own. You can read his full ten point plan here.
It includes a “Create Homes for Younger People” (HYP) programme to help one million younger households over the next decade – half by helping with deposits for 500,000 new build homes, half by building 500,000 new discounted rental properties for young working people. This would be funded through “capturing more planning gain and by transferring the remaining local authority housing stock to housing associations”.
The bit which got the most attention was the suggestion buy-to-let should be curbed. There was a call to reform property taxation to “limit demand for housing and land as speculative assets”. Neil suggests cutting other taxes to encourage investment into businesses and more productive assets.
The report said: “On a grandfathered basis, end loopholes within the Capital Gains Tax (CGT) exemption for the primary residence and reform mortgage interest relief for landlords. In areas where affordability is worst, give councils powers to limit overseas purchases of new homes.”
How did people react?
Financial journalist Paul Lewis (Paullewismoney), said of the proposal to end tax subsidies for buy-to-let landlords: “A bit late but they are being eroded so Chancellor could easily take those last steps”.
Jane Bradley (jane_bradley), investigations correspondent at BuzzFeed UK, said: “Staggering statistics in this FT report on how the government’s buy-to-let strategy has kept millions locked out of owning their own home”.
Jonathan Bartley (@jon_bartley), Streatham councillor and co-leader of The Green Party, said: “Ending tax breaks for buy-to-let landlords is already proposed by @TheGreenParty Govt shouldn’t be subsidising & fuelling the speculation which treats homes as commodities and drives up prices”.
Daniel Farey-Jones (DanFareyJones), ex-news editor of PRWeek UK, said: “Buy-to-let bubble would burst sooner or later – might as well pop it now before it does more damage later”.
Jim Pickard (@PickardJE), chief political correspondent for the FT, said the figures were “eye-popping”, and added: “The radical recommendation by @ukonward is to remove ALL mortgage interest relief for buy-to-let investors on their new purchase”. He said: “In theory Treasury could go further and impose an even higher stamp duty surcharge on buy-to-let purchases of existing (not newbuild) homes. Either a) they can afford it, so more tax revenue or b) it slows the market down, meaning less competition for first time buyers”.