UK housing – fixing the leaks without rocking the boat (much)

I have just been reading a report by the great and the good, The Future of Housing: rethinking the UK housing system for the twenty-first century, being the result of a 3-day seminar chaired by Richard Best and published by the “Building and Social Housing Foundation” of which I had never heard.  It came free in the post (from Coalville) and… is also available as a download at http://www.bshf.org/scripting/getpublication.cfm?thePubID=4FF3F1F7-15C5-F4C0-99959BAD3ED44A50
It’s well worth reading, full of useful info, and represents the powers that be asking (about half of the) awkward questions about the UK system. It has a fine statement about how we should not be trying to go back to the status quo ante.  But it clearly does not want to rock the boat which is the class-ridden exploitative society of the UK and the disastrous global regime of capital accumulation.  It doesn’t touch pensions or wealth distribution issues, or the level of wages and it clearly wants an essentially individualised (not socialised) system – tho’ opening a window for ‘innovative forms…’   I’d be glad to know what you make of it.  I’m putting this on my blog and hope you might put any comments there – so that we have this discussion in public.

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Author: Ed

Editor

6 thoughts on “UK housing – fixing the leaks without rocking the boat (much)”

  1. I had seen this and discussed with one of the the authors, Jim Vine. It is
    useful but not as radical as it might have been. Have you seen the SHELTER
    tax reform paper – on their website – it at least raises radical
    taxation options such as removing CGT exemption for first homes.

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  2. Thanks for the write-up on the report, Michael, and for both your kind words of the benefits of the report and your feedback on the elements you think don’t go far enough. I hope it’s helpful to respond here to some of your points, and those in the responses you’ve received.

    @ Bob Colenutt

    Regarding the perceived lack of radicalism, perhaps it might help if I explain the process through which we produced the report. It came out of a 3-day meeting in the summer with a range of experts from across the housing system. As a result of the discussions we identified eight key areas for attention, which more or less had consensus amongst the participants. Whilst these may not seem all that radical, several of them would require some pretty bold actions to come to fruition – reforming the housing taxation system wouldn’t come easily, nor would reforming support systems like housing benefit; addressing house price volatility (a subject that JRF is looking at closely) would take major structural change, and the retrofitting of the existing housing stock to reduce carbon emissions implies a huge programme of activity across the country. Radical? Perhaps not, but they certainly urge bold action.

    As well as the key areas for action, the event generated a long list of ideas, many of which we have phrased as the “awkward questions” Michael refers to. I think within those questions there are a number of ideas contained that many would view as radical. Just in the first few pages of questions we mention Land Value Tax, introducing Capital Gains Tax on principal residences, remutualisation of government-owned banks, debt-free and interest-free models of housing finance, reviewing green belt policy… As I say, these are posed as questions, and we haven’t sought to assert conclusions about which are the most appropriate or viable, but I hope they illustrate that we did not shy away from including radical ideas within the report.

    @ Michael Edwards – “it clearly wants an essentially individualised (not socialised) system”

    At present we have a highly individualised system – circa 70% of people are owner occupiers, with another 12% or so in the private rented sector. That’s the starting point that any discussion must acknowledge. The report does explicitly list “smaller housing associations, co-operatives, community land trusts and other mutual providers” as amongst those that could be included in a broader range of housing production (although, to be fair, the thinking there was probably more focussed around who could be pulled in to increase overall supply, as that’s a major challenge in its own right, separate from discussions of ownership).

    The report also calls for the flexibility of tenure to be increased, allowing people to move between tenures. Would you feel that a situation where you knew you had the opportunity to access, for example, a social rented tenure should you need / want to, could socialise some of the risk, even while the household is living in owner occupation? Of course there are tensions if all risks are socialised and all rewards individualised, but I think the report envisages a situation where our homes are valued for the housing services they provide, not as speculative assets for wealth accumulation, which I guess implies that the potential for financial rewards would be more moderate to start with.

    @ Duncan Bowie

    It’s great to see Shelter (and others) taking a close look at housing taxation, and I hope their recent publication contributes to ongoing discussion of the subject. As I mention above, the BSHF report does mention ‘radical’ taxation options such as CGT on principal residences, LVT and reform of IHT. We’re not yet in a position to make a recommendation about which of these and other options should be implemented (and I don’t think Shelter would claim to be either), but we do strongly assert the importance of taking a good look at the question.

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  3. Dear Jim Vine. Apologies: for some reason I didn’t find your long thoughtful comment for nearly a month – tho presumably it has been sitting here. I do take your points and I can see that the seminar/report did ask lots of awkward questions. The core issue for me is captured where you say “…Of course there are tensions if all risks are socialised and all rewards individualised, but I think the report envisages a situation where our homes are valued for the housing services they provide, not as speculative assets for wealth accumulation, which I guess implies that the potential for financial rewards would be more moderate to start with…”

    Moving towards such a system seems to be the great challenge. Among the problems to be confronted in the process are – surely –
    (i) managing things so that house prices remain ± constant in real terms and are expected to do so;
    (ii) accepting some reduction in ‘competitiveness’ as people become less enslaved to massive mortgages and thus take a bit more leisure, are less disciplined/compliant as workers; but this would be offset as and when lower housing expenditures worked through into (relatively) lower wages and salaries;
    (iii) making sure that people who want to save can do so, other than through maximising their ownership of housing. This is a tall order with so little confidence remaining in pension and insurance schemes.
    (iv) finding ways to organise and finance infrastructure and urban development, probably using a lot of bond financing – and perhaps these bonds would be an appealing savings medium.

    There is a lot of analysis to do to get it all conceptually sorted, and I’m keen to do that – a bit separately from the equally necessary process of working out what would be practical reforms. Maybe we should meet up. Happy new year, Michael

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  4. You are, of course, correct that moving towards a situation where house prices are roughly static (and are expected to stay so) is no small challenge. Three ideas that might have that effect (in fundamentally different ways):

    1. Land Value Taxation at a sufficiently high level would subdue the speculative (land) component of house prices (which is, of course, what is really increasing – the homes built on the land are assets that would, all other things being equal, tend to lose value over time as they deteriorate and need repair).

    2. Scrapping all planning regulations (or very significantly loosening them) would remove the scarcity value of land with planning permission (including land that has been built on, and hence house prices).

    3. Housing derivatives provide a potential way of decoupling the financially speculative element of housing from the housing services element may achieve some of the objectives and possibly provides a savings vehicle to help with your point (iii) too. Housing: Risky Business [http://www.swaprent.com/files/Housing_Risk.pdf], by Susan Smith of Durham University provides a brief overview.

    Note, I’m not claiming any of these to be panaceas, or even necessarily sensible – there are plenty of downsides and some of these possible medicines could be worse than the disease they try to cure. I am just throwing them into the pot in the spirit you propose of trying to get things conceptually sorted, separate from a process of working out what’s actually feasible.

    Addressing the second part of the equation (i.e. “expected to stay static”) suggests a political requirement that would need to be addressed – any proposal would need broad / cross-party consensus, otherwise the public would assume it would be reversed as soon as the other lot got in, and would tend to postpone their actions pending that. Such a policy would therefore only harm those who due to their circumstances were unable to postpone, and had to act at a bad point in the cycle.

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