Private landlords are putting home ownership beyond the reach of at least 2 million families, that’s the conclusion of a radical new report from a new Conservative think tank “Onward”.
The Conservatives are concerned about the “unbalanced” nature of the housing market and how it may affect future voting patterns. With now approximately one-fifth of voters – predominantly young voters – living in rented accommodation, and likely to vote for an alternative government, the Conservatives see an urgent need for rebalancing!
The report published by the Onward group recommends ending, or severely curtailing, all tax breaks for buy-to-let and private landlords.
They want a stronger housing role for local councils and a major reform of the local planning system to put communities rather than developers in the driving seat.
More than 2m families are now denied home ownership as landlords as landlords have unbalanced the housing market away from first-time buyers, that’s the conclusion of this Conservative think-tank.
These are quite radical proposals, set-out in a pamphlet published on Monday by the Onward group, and come from the Onward think tank set-up earlier this year. The report is written by Neil O’Brien, a former aide to George Osborne. He also worked for Theresa May at No 10, and now calls for radical government intervention in the housing market, including giving London councils the power to limit foreign ownership.
Mr O’Brien says:
“We need to change the balance between the rented sector and home ownership, We should protect existing landlords but discourage more people from investing in rental property, because the buy-to-let boom has bid up prices and reduced homeownership among younger people.”
Tax Relief Cuts
Even though some previous governments have brought in swinging tax relief cuts on such things as mortgage repayments and maintenance allowances for landlords, this report says that buy to let is still a privileged form of investment. It is reducing the number of homes available for owner-occupiers, and at the same time, reducing the amount of capital available for more productive investment, says the report.
The think-tank makes several recommendations as to how to increase the supply of new homes. But the Conservatives find themselves on the horns of a dilemma: any call for a crackdown on residential investors is likely to cause controversy among the politicians, with many Conservative MPs loathe to target the PRS given that many wealthy landlords vote for the party, and indeed many MPs are landlords themselves.
The Onward group is just one of several Conservative think-tanks floating ideas to which would mean the party can reconnect with younger voters, many of whom would otherwise be attracted to the housing policies and promises of a new Labour government.
Their problem is that many of these policies, both Conservative and Labour, fly in the face of economic reality: in a post-recession era of ultra-low interest rates, asset prices have gone through the roof across the Western World. Not just Britain but the USA, Canada, Australia, the Anglosphere in general, has experienced the same phenomenon. House price inflation is excluding the young from home ownership, but it favours older people with money to invest. The banks and building societies offer a pittance in interest, so hence the search for higher returns in property.
So, landlords have benefited from record-low interest rates for over a decade, as cheaper borrowing costs have lowered monthly mortgage payments while pushing up property prices.
But despite the 3% surcharge on stamp duty for buy-to-let landlords, as well as the phasing out of mortgage interest tax relief for higher earners, to the basic rate of tax, the Onward report is calling for much tougher action. This includes the complete removal of mortgage interest relief, regardless of income.
According to the report, in the 1960s and 70s, UK private renters paid on average around 10% of their income on rent, but today that figure is closer to 30%, and even higher at 40% in London. The report’s author, Mr O’Brien, who is now the Conservative MP for Harborough, says:
“We can’t solve the housing problem with one hand tied behind our backs.
“As well as building more homes, we need to change the balance between the rented sector and home ownership. The buy-to-let boom has bid up prices and reduced home ownership among younger people.”
Mr O’Brien is suggesting that local councils need powers to limit foreign buyers from purchasing new homes, and is urging the government to set a long-term target to make housing more affordable.
Onward would have councils given the power to borrow money to invest in development land, allowing local communities, rather than developers, to reap the benefit from the uplift in value due to planning permission grants.
Will Tanner, who is another former Downing Street policy adviser, and director of Onward, says it is possible to tackle the housing crisis without concreting over the green belt:
“If the government wants to regain the support of young people … it must be unflinching in its pursuit of greater home ownership. That means hard choices like ending tax breaks for new landlords and giving councils much stronger powers.”