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The housing market one year on

Labour still isn’t talking about the housing market.
It talks about housing supply, but not the housing market, which is a bit like talking about the supply of baked beans without mentioning Tesco, Sainsburys and Morrisons. Sometimes it makes a moral case about the way in which London is becoming Monaco on Thames, the preferred refuge of tax dodgers and crooksfor whom the South of France is too challenging, but in the process it seems shallow and London centric.
There are key issues about private housing which are elided both by Labour and the constant stream of property porn programmes on TV, and which haven;t changedsince we first visited this topic a year ago.
Issue one is Whole of Life cost. Focussing on the price of a house, without mentioning the maintenance it will require throughout the ownership period,is simply wrong. Like not focussing on the cost of maintaining your car, it means that there are going to be nasty surprises along the way. Successive governments have subsidized private home ownership, through measures like improvement grants; the current trend is for those subsidies to be dressed up as green grants for boilers or insulation, but the reality is that they’re a subsidy to private home owners and landlords, reducing the real economic cost of their investment. When I first worked for builders, more than a couple of decades ago, it was the fag end of the improvement grant boom, when every cowboy with a trowel and level was busy building bathrooms and kitchens on the back of Victorian terraces. The labels put on the subsidies changes, but not the effect- those already in the market are subsidized at the expense of those excluded.
Whole of life cost for property needs to reflect the reality, that just as cars have to written off or scrapped, so do houses, leaving only the residual value of land. Across the UK, outside the South East, government has struggled deal with the costs of urban abandonment, the clearance of unwanted terraces that are little better than slums and their replacement with more desirable homes. The exemption from capital gains tax of private homes means that property buying is a game where the winners keep all the proceeds and the losers leave the bill to the government. It means that no-one can ever tell you what proportion of the whole of life cost of a property is borne by every taxpayer via subsidies and tax exemptions.

The second issue is Housing Benefit, or, to give it its proper name, landlord subsidy. The price of a house is one of two calculations; either how much you can afford to pay to live in it, or the return it can generate in rent. If rent is subsidized by the state, and the subsidy is matched to the price landlords charge in the local market, then, without rent controls, the result is that the level of rents will always rise, and value of houses will rise too. Add in a period of low inflation and low interest rates, and housing benefit is an incentive to speculatively invest in property.

If Labour doesn’t talk about this, then it’s condemning itself to repeat the same mistakes it made throughout its time in government.

The failure to have conversations about the real cost of housing, and the real levels of subsidy, fuels another debate that no-one is willing to have. Bluntly, there are plenty of people for whom buying a house is not the best option, and never will be, because they will always lack the cash to maintain the value of the investment.

The housing issue is hugely emotive, not least because so many local authorities gave social housing such a bad name in the past – the time when deck access housing and the skyscrapers of Tyneside seemed like a brave new world was a long time ago. Nevertheless, Labour has to have that debate, a debate about how we regulate and manage the housing market to ensure no-one goes homeless or cannot afford a decent roof over their head.

Right now, it seems like a conversation Labour isn’t willing to have.

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This entry was posted on June 10, 2016 by in Uncategorized.

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