Will these five steps help the UK end its housing crisis?
One curious thing about Britain’s housing market is that it’s not really a market at all [Image: Dominic Lipinski/PA].
The main premise seems to be at the end – that productivity needs to rise in order to stoke a rise in wages.
But we have a Conservative government that is determined to cut wages – to keep working people down, in the service of the idle elite class that Theresa May epitomises.
So, is this theory realistic?
With ownership plummeting, rents unaffordable and homelessness on the rise, action is needed to stave off a crash.
One curious thing about the housing market is that it is not really a market at all, at least not in the classic sense. As every student learns on their first day of economics, markets work through the law of supply and demand. Low prices act as a disincentive to produce but as prices rise so supply increases. Conversely, demand falls as prices rise because buyers consider products too expensive. There is a point where there is neither too little nor too much supply, but just the right amount to satisfy demand.
The world of real estate, however, is a million miles away from the textbooks… Homeowners hold on to their homes because they assume that their property will continue to go up in price. Nor do rising prices dampen demand. Rather, people think they had better scramble on to the ladder before it is too late.
The alternative to yet another boom-bust is to try to construct a saner housing market. There are five steps to this. The first is to stop doing more harm through counter-productive policies such as help to buy. The second is to change the tax system, starting with council tax reform and action to prevent land hoarding. The third is to increase supply, and the housing expert Kate Barker has suggested ways the government could do so, such as identifying large sites abutting urban areas and acquiring them at a modest premium to the value of their existing use.
Step four is for the Bank of England to adopt a kid-glove approach to raising interest rates. The idea is to engineer a gradual fall in real – inflation-adjusted – house prices, not a recession that leads to a sharp increase in unemployment.
Step five is to find a way of boosting wages, because there are two ways in which houses can become more affordable. Earnings can rise or house prices can fall. The housing market will only become less dysfunctional when Britain becomes more productive.
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no . once again this is concentrating on building to buy. not rent. thousands on thousands of people are homeless because they cannot get LA housing due to bedroom tax. but renting from private landlords is a minefield now if you dont work.are sick, young unwed mum etc.plus landlords seem to evict people with no just cause other than theyve decided to sell up. (1relative has experienced this with both of the houses shes rented since leaving her abusive partner 13 years ago, the last being 3 months ago,estate agents that charge so many fees for different things it can easily add up to a thousand pound or more.where do people on benefits find that sort of cash from? assuming they will accept a lazy, unemployable, dirty rat on benefits*not my words . but words formed while listening to these tory landlords… Another young member of my family recieved eviction notice from the room she rented in a womans house. WHILE SHE WAS IN HOSPITAL AFTER JUST GIVING BIRTH.and the notice was 2 weeks ftom her discharge date.she had only lived there a few weeks.the woman knew she was pregnant when she let the room to her. since this youngster got out of hospital shes had nothing but verbal abuse from this woman, telling others this girl is a lousy mother( i know her well and she is a really good mum . but the stress this woman is giving her has caused her milk to dry up and the baby now 14 days old only, is fractious. she is now having to put her on formula feeds. this is what the state of our fellow man(& woman) has come to. more social housing to rent would solve a lot of peoples problems. around the UK but all they seem to concentrate on is providibg housing to buy.
Note that he fails to talk about the private rental market which is a major factor.
private rentals though are of no use to those on benefits. or low wages. majority of those people have to have guarantors now. bond/rent in advance and as so many landlords now go through estate agents, there are countless fees for all sorts of things , mounting up to around a thousand pounds in some cases. where is anyone on benefits or low wages going to find that amount of eye popping (to them) money.