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BobTheBear

Is A 'two Tier' House Market The Solution? A 'what If' Scenario

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Forgive me if this has been discussed on here before, and I touched on it in a previous post, but I think it's something that might just work. Well that is to say it would work in a country where the government actually tries to govern for the greater good, so not in this one of course.

Imagine if nationally and as a condition of planning consent for all housing developments that 25-30% of land area had to be set aside for affordable new homes . Nothing new here you say, this already happens in many cases. What happens though is that houses are built either for rent by housing associations, or rent to buy (shared equity) at 'market' valuations. The key to true 'affordability' is lower prices, and as we all know, a large part of today's inflated prices is not the actual cost of construction, but that of the land. So, why not force the sellers of all building land to sell that 25-30% chunk of land at a nominal price (say that of poor agricultural land) for the construction of houses that actually are affordable? If built by non-profit bodies like housing associations this would then bring prices down closer to historically normal income multiples. The governments help to buy schemes should then be restricted to just this type of low cost housing. A further advantage is that the long term capital required comes from the mortgage market, and does not have to be found by the housing associations.

Obviously to prevent abuse houses could only be sold as the buyers only home (no BTL'ers), and if sold would have to be sold back to the housing association at the original purchase price +RPI (not HPI) or some such formula. The idea to remove any idea that it's an 'investment', i.e. leveraged play on HPI, but a home to live in and eventually own. I believe this would remove the need for much 'social housing' and maintenance costs would be removed from housing associations as 'owners' tend to look after their 'their' property far better than tenants do, especially some of those in social housing. Furthermore, buyers would be free to improve the property if they wish.

If adopted widely as part of a large house building programme, this will gradually have the effect of driving down rents, and forcing many BTL types to sell up, further depressing residential market valuations, especially at the bottom end. In time the market values and affordable house values would converge. This would result in a slow motion HPC which would at least not wipe out all the banksters. Well no plan is perfect! Any thoughts?

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