Submission to the select committee on economic affairs inquiry into the economics of the uk housing market

Prof. Mark Stephens

The Joseph Rowntree Foundation’s Housing Market Taskforce (Stephens, 2011) was established 2009 and reported in 2011. It was made up of an interdisciplinary group of experts who were charged with identifying long-term solutions to the problem of house price volatility in the UK.

Its recommendations were aimed at creating a more socially sustainable housing market in which vulnerable households are better protected from the effects of volatility. Although its report was drafted during the first year of the Coalition Government five years ago, it provides a framework for providing responses to the questions being addressed by the House of Lords Select Committee on Economic Affairs Inquiry into the Economics of the UK Housing Market.

Key points

  • The UK faces a long-term failure of housing supply to keep up with demand. This has contributed to the UK’s volatile housing market.
  • Government schemes are likely to benefit the people who take advantage of them, but are likely to contribute to the maintenance of generally high prices. They are becoming part of a system that keeps house prices artificially high.
  • The effects of Stamp Duty concessions are likely to benefit owners of property as they are “capitalised” into higher prices.
  • Stamp Duty thresholds should be uprated automatically to avoid fiscal drag.
  • There is a case for reviewing the impact of the Mortgage Market Review.
  • Buy-to-let mortgages should be brought within the remit of both the Financial Policy Committee (macro-prudential regulation) and the Financial Conduct Authority (micro-prudential regulation).
  • The Committee should explore the reasons why insurance products that facilitate higher LTV loans are no longer available from the market.
  • The role of the planning system in inhibiting new housing supply may have been exaggerated. It should be explored alongside a wider review of the supply of land, the role of development gain and the provision of infrastructure. The role of land auctions and the taxation of vacant land should be considered.
  • The reduction of tax relief to private landlords adds to the tax advantages enjoyed by owner-occupiers. The additional costs are most likely to be passed on to tenants in high demand markets, where affordability is already most stretched.
  • Regulation that is sensitive to the market can play a valuable role in creating a rental culture, but that it cannot be used as a long-term solution for chronic housing shortages.
  • Social rented housing is the most suitable option for households that seek long-term security, but who cannot safely access owner-occupation.
  • Its supply is threatened by the extension of Right to Buy and enforced rent reductions. However, the Starter Home scheme poses a direct threat to new social rental provision through the diversion of planning obligations away from it.