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AndyFTB

What Can The Government Do About House Prices?

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Below are ten potential Government policies/legislation which would actually have a real effect on house prices and get them to a realistic level for the majority. They are not all without side effects and associated costs, and they are not all practical, but still, discuss :-)

1) Ban foriegn ownership of property. So from now on to buy a house in Britain you must have a British passport. This will stop the influx of foriegn (often from dubious origins) money coming in and buying high end property in London at any price simply to put the funds in a "safe" place. The knock on effect of this though is it trickles down through the entire London property market and then outwards accross the country putting up prices everywhere. Any foreigner currently owning property in the UK would be allowed to keep it but upon their death it must be sold. These people never actually live in the properties anyway, and this will ensure a slow and steady release back onto the market. (Many other countries have this law, Thailand, Russia,...)
2) Ban anybody from owning more than four properties. There is no possible reason one person needs more than four houses. I cant think of many reasons to need more than two and the vast majority of the population get by just fine with one. Nobody is allowed to have more than four. Anybody who does must sell one (or more) a year every year until they have four.
3) Council tax on any second property is charged at a rate of 50% MORE than the rate on your first property. The third property you own is 100% MORE, the fourth home 200% MORE. This is to strongly disincentivise people having extra largely vacant properties for the sake of it as "holiday homes" or "crash pads". That could be somebody elses only home which is much more important.
4) As soon as planning permission for a property to be built is granted the owner is liable to pay 50% of the council tax it would be liable for when built. This is to encourage large building firms to get a move on and actually build houses rather than buy the land and apply for planning permission then happily let it sit on their "books" as a large asset slowly drip feeding the market to keep prices high.
5) Revisit the "Greenbelt" land definitions and make it easier to build on these areas. The idea of "Greenbelt" began BEFORE the Second World War and was formalised in the 1950s. In the 1950s we lived in a very different World with a UK population of around 50 Million. We now have an extra 15 to 20 Million people to fit in and what was a nice idea back then is no longer appropriate.
6) Scrap all housing benefit completely, it is a ridiculous policy which no other nation on Earth has. To directly pay for housing forces up demand artificially as cost is not a factor and this reduces supply to the free float market which raises the market rate which then costs the council even more and it is a vicious circle. Just stop it completely and possibly raise other benefits to help cushon the shock and act as a substitute. The same number of people will need the houses and the same number of houses wil be there the landlords will not let them sit empty the market will find its level, it will just be at a level much lower than when the council is writing a blank cheque.
7) Capital gains tax on any second (or more) property sold will be set at 99%. A house is something to live in. It is not an "investment" and its status as such should be stopped. By a second home if you must but dont do it because you think doing so will make you any money.
8) Rental contracts can only be terminated by the person renting, not the Landlord. Rent can only rise each year by the official amount of inflation. If anyone rents a house continuously for ten years (without missing any payments) they have the right to buy the property at 5% less than the current market rate. This is to prevent people seeing renting as "dead money" and also to make it considerably less attractive for people to buy homes specifically to let them out as investments.
9) Just raise interest rates a bit, the rate has been artificially low for a very long time, and a rate of nearer 4% (the UK long run average in the 20th Century) would stop so many people thinking its a good idea to take a maximum mortgage amount possible as its virtually free money. Make money cost something to borrow and people will be much less inclined to borrow it!
10) The Governement should directly intervene in the housing market and form a Nationalised house builder to actively increase supply. This could be staffed by otherwise unskiled school leavers, maybe ex prisioners, basically people who would like to learn a trade but would struggle to otherwise gain employment in the private sector. To build a house you need plumbers, carpenters, electricians, as well as ground workers through to architects. A Government organisation for house building would be self funding as the houses are sold yet have huge social benefit from the jobs provided as they are built. As well as of course reducing the average price of a house.

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It wouldn't be hard for gov to implement some of these. As you say plenty of other countries have anti-HPI housing policys. It's a deliberate act on UK govs part to keep HPI positive.

So a slightly different question, is there any reason you think UK gov is motivated to lower nominal house prices? They go to great lenths (and possibly expense) to prop it up.

I've seen some evidence of them wanting to dampen down growth slightly. But no sign at all of a will to lower prices.

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Nothing, that is what they should do. Get out of interfering in the market.

+1

Make sure banks have to cover their own insolvencies instead of the rest of us bailing then out.

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A related point is to have better security of tenure in rented housing and better tenant rights.

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Wow - there's some real doozys in there but I really like this one

4) As soon as planning permission for a property to be built is granted the owner is liable to pay 50% of the council tax it would be liable for when built. This is to encourage large building firms to get a move on and actually build houses rather than buy the land and apply for planning permission then happily let it sit on their "books" as a large asset slowly drip feeding the market to keep prices high.

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The foreign ownership one - your terms are a bit too onerous and unrealistic.

Imho You should be allowed to buy a house wherever you like and having whatever passport you like but you must buy it to live in it. Simple.

My parents don't have British passports, but I was born here. What happens when they pass away? Would I be forced to put it on the open market and buy it myself rather than simply inheriting it? Sounds like I'd be paying a bunch of fees (stamp duty etc) and dealing with a load of hassle for no apparent reason.

Equally if I want to buy a house abroad, live in it, learn a language and contribute to that society why do I have to get a new little book?

I hate beaurocracy. Just remove all props and let the market do its thing.

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Add to the list a zero NI contribution theshold and half the Personal Allowance for all non UK citizens working in the UK with a sliding scale up to 10 years to come level with UK residents.

Bit like a No Claims Discount to discourage low value migrants and thus put downward pressure on housing costs on two fronts.

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3) Council tax on any second property is charged at a rate of 50% MORE than the rate on your first property. The third property you own is 100% MORE, the fourth home 200% MORE. This is to strongly disincentivise people having extra largely vacant properties for the sake of it as "holiday homes" or "crash pads". That could be somebody elses only home which is much more important.

Totally agree with this. Any discounts for empty properties should also be removed.

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Add to the list a zero NI contribution theshold and half the Personal Allowance for all non UK citizens working in the UK with a sliding scale up to 10 years to come level with UK residents.

Bit like a No Claims Discount to discourage low value migrants and thus put downward pressure on housing costs on two fronts.

So that means what - mental arithmetic -

.2 * 5.5k + .12*5.5k. Another 1500 quid in tax just for being a capable person?

Why on earth should a high value migrant pay more tax for 10 years? People with decent incomes are taxed enough already thanks.

Edit. Just remove working tax credits and housing benefit full stop. Then see who comes here.

Edited by Frugal Git

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Nothing, that is what they should do. Get out of interfering in the market.

+1000

We don't need any more govt "help". What we need is the govt to stop ******ing helping and just let gravity do its thing. Amazing how simple the solution is when your whole future doesn't depend on you not solving the problem.

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Wow - there's some real doozys in there but I really like this one

4) As soon as planning permission for a property to be built is granted the owner is liable to pay 50% of the council tax it would be liable for when built. This is to encourage large building firms to get a move on and actually build houses rather than buy the land and apply for planning permission then happily let it sit on their "books" as a large asset slowly drip feeding the market to keep prices high.

Why 50% it should be 100% from 24 months after change of use is granted, no need to wait for detailed planning. This is a completely painless change for any company that has the intention a ability to develop the land in a reasonable timescale.

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Nothing, that is what they should do. Get out of interfering in the market.

Without state intervention, there's no land ownership and no housing market as we know it.

When you say 'get out of interfering in the market' all you're really doing is specifying the kind of intervention you like.

That's fine, but it is no argument against intervention.

Anyway, the correct solution is a land value tax, and this has been understood for over one hundred years.

What I would do, were I in charge is:

Announce that I was targeting a fall in housing costs.

Immediately scrap HTB.

Immediately increase capital charges on buy-to-let mortgages significantly.

Stop the BOE from treating mortgage backed securities as collateral.

Remove all tax breaks for landlords.

Increase the minimum notice periods for landlord evictions.

Ban foreign absentee ownership of houses, and all foreign ownership for citizens of countries who ban foreign ownership (so a reciprocal arrangement).

Inheritance tax on houses at income tax rates (all inheritance tax should be at income tax rates, it's income) with some exemptions.

Freeze housing benefit (with the aim of abolishing it in the long-term).

Remove planning restrictions on self-build.

Institute a landlord registration scheme with minimal qualifications (criminal record checks, etc)

Estate agents regulated in the same way as other brokers, particularly with regard to money laundering (and generally, bring all asset classes in-line).

Notice that none of these require building, and none involve regulation that we don't tolerate in other circumstances.

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They should charge landlords council tax on all student properties by declaring them HMOs (most of them should have been declared HMOs anyway) and removing exemption for students living in them. They should simultaneously cap the rents in those areas.

That would bring in a sizeable chunk of tax and discourage landlords from converting family homes into HMOs with all the problems that brings to local communities which would hopefully bring house prices down an ickle as demand for purpose built accommodation would increase and supply of family homes increase too.

Edited by spacedin

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In the case of rental properties its the tenant that pays the council tax not the landlord. You could argue that it should be the other way around and the landlords should pay either all of a proportion of the council tax, but there you go.

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The housing market is so grotesquely distorted I hardly know where to start.

Governments dont have a good record of controlling markets and I expect it will run out of their control when we least expect it.

I will give them their due though, they have done a good job of shifting wealth into the hands of the wealthy in recent years. I have to assume that was the plan.

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I think offer more subsidy to buy at inflated prices. Got to keep the ponzi going!

Personally, I am waiting for the 100% interest free HTB loan to help me onto the housing ladder! :P

As for what the Government can do, LTV is the way to go.

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All of the policies to take effect on Monday:

End help to buy and right to buy.

Remove stamp duty on 1st property (this to be balanced by land value tax, maybe lower threshold inheritance tax etc.). Increase 2nd property stamp duty to 10%.

Section 24 (immediately at 2020/21 level, not 2017/2018).

If this doesn't force millions of landlords to start selling within days, start compulsory purchase of landlord properties at some fair value (some sensible income multiple).

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In the case of rental properties its the tenant that pays the council tax not the landlord. You could argue that it should be the other way around and the landlords should pay either all of a proportion of the council tax, but there you go.

Not with HMOs. It's the landlord's responsibility with HMOs that's why they love students so much.

Quit your degree mid term though or have a brief hiatus to get your head straight? You'll be out on your **** unless you pay the landlord's council tax for him.

Edited by spacedin

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There's some excellent suggestions and ideas being offered.

Which tells me TPTB prefer to keep the status quo with a bit of tinkering to show they're doing the right thing for hard-working families

Keep the status-quo? So no HPC?

You can drop the human-shield then of HPC and suffering of owners, for status quo. Also locks in your own house price yes. No sweating it might drop in value any more?

Your recently divorced newbuild Barratt SE buyer friend can relax, having just bought a house because she needed a house, at today's price she was willing to pay.

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