Inquiry into the economics of the UK housing market launches
03 November 2015
The House of Lords Economic Affairs Committee launches a new inquiry into the economics of the UK housing market. The Committee investigates the supply and affordability of housing across the housing market and reviews the effectiveness of the Government's policies to provide low cost housing to rent and to buy.
- Inquiry: Economics of the United Kingdom housing market
- Call for Evidence: Economics of the United Kingdom housing market (
PDF 183 KB)
- Send a written submission
- Select Committee of Economic Affairs
Focus of the inquiry
The Committee has published a Call for Evidence and is inviting written submissions to arrive no later than 17 December 2015.
Areas the Committee are inviting evidence on include:
- How can we increase the supply of reasonably priced private housing in the UK?
- How effective have Government schemes such as Help to Buy been in improving the affordability of housing?
- Are there tax measures that could improve housing supply and affordability? What impact will the proposed changes to inheritance tax have on housing supply?
- Have the 2014 reforms to Stamp Duty had an impact? Should there be further reform to Stamp Duty?
- Are changes to the planning system needed to increase the availability of low cost housing?
- How can we improve the availability of low cost private rental properties? Will the current trend for a decline in home ownership and rise in private rental continue and is it desirable?
- Is there a case for restricting rent increases in the private sector?
- Are new measures needed to increase the supply of social housing?
Lord Hollick, Chairman of the Committee, comments:
"There are clearly serious issues with the UK housing market. Across the country, young people in particular are struggling with the cost of housing, whether they are looking to buy or rent. There is an affordability crisis in housing."We feel the time is now right for a thorough evidence based assessment of the economics of the housing market. We would like to get to the bottom of the affordability crises. Is the primary cause a lack of supply? What effect have recent Government initiatives to encourage first time buyers had? Or is there too much emphasis on owning your own home, should we be focusing efforts on ensuring adequate affordable housing is available for rent?"Our inquiry will rely on the evidence we receive and we would particularly like to hear from people who are struggling with the cost of housing. I would invite anyone interested in this area to send us their evidence by the 17 December so they can contribute to our inquiry and help us find the some answers to the urgent housing challenge our country faces."
Submissions should be in by Thursday 17th December:
Economics of the UK housing market- written submission form - UK Parliament
Inquiry into The Economics of the UK Housing Market | ARLA
Here's one list of 'what to do' about the economics of the housing market:
The elasticity of housing supply in the UK is low – one of the lowest in Europe – current policy is focused on improving the elasticity of supply so that house building is more responsive to changes in market demand.
- A loosening of planning restrictions: Relaxation of planning constraints for new housing – including relaxation of the greenbelt restrictions. There is no shortage of land in the UK, merely a shortage of land on which it is possible to build new homes.
- Building homes on brown-field sites: Financial incentives for construction companies to build on brown-field sites (e.g. previously developed land).
- Encouraging self-build schemes: Self-build homes work out cheaper in the long run and they give people the satisfaction of building a home to their own specification and design.
- Build more social housing: Allowing each local authority (council) greater freedom to borrow money to fund the construction and supply of social housing may help to reverse the collapse in the building of council properties over the last ten to twenty years. Increased funding for the 1,400 housing associations responsible for building and maintaining nearly 3 million homes in the UK is also an option.
- Increased innovation and productivity in house-building industry: Encouraging more innovation in the building industry – for example innovations that make it possible to build new homes attractively at higher densities (i.e. more properties per square acre).
- Reducing the number of empty homes – There are several options for this including compulsory purchase orders if owners of properties allow their properties to remain empty and unused for 6 months or more – these properties could then be made available to people on housing waiting lists at sub-market rents.
- Tax breaks for investors willing to make rented properties available at affordable rents.
UK Housing Market - The Housing Shortage | Economics | tutor2u
And here's another:
Crisis, what housing crisis? We just need fresh thinking
Here are the most damaging myths about the policy issue that’s on everyone’s lips – and a few brutal realities
Housing is Britain’s top policy issue. It is the “crisis” of our day. London’s mayoral elections, says Labour’s Sadiq Khan, should be a “referendum on the housing crisis”. The migration crisis, the NHS crisis and the poverty crisis all pale before its awesome might. So what is the “solution”?
There is no solution. As in all political crises, there are tribal myths and economic realities. When the myths win, policy degenerates into chaos and counterproductivity. First, let’s deal with the myths.
1 That there is a housing “crisis”. There is none. Too many people cannot find the house they want in London and the south-east, which is where most politicians and commentators live. This is inevitable where an economy is booming. Average prices in London may be £500,000, but in the north-west and north-east of England they are £150,000. You can get a decent home in Salford for £65,000.
2 That an average is a minimum. It is not. Housing hysteria is based on averages. When someone asks “How can I possibly afford £500,000?”, the answer is: you cannot, but somebody presumably can. But go on Zoopla and there are houses in parts of London for £180,000. Even the poorest newcomers seem to find somewhere (usually private) to rent.
3 That there is a national “need” for 250,000 new houses a year. For decades this has been Whitehall’s meaningless concept of “household formation”, taking no account of regional preference, propensity to move home, house prices or cost of finance. Housing need implies homelessness. It should refer to the 60,000 people currently in temporary accommodation, who ought to be the chief focus of policy attention. All else is “demand”.
4 That the solution to house prices lies in building more new houses. New houses are always worth building, where the infrastructure is in place. But new houses account for a mere 10th of housing transactions. The chief determinant of house prices is the state of the market in existing property and the cost of finance. During the sub-prime period, prices soared in America and Australia despite unrestricted new building. It was cheap money that did the damage. The house-builders lobby equates housing to “new build” because that is where their interest lies.
5 That the solution lies in the green belt. This is an anti-ruralist’s version of myth four. Even were the green belt obsolete, which few accept, or partly so (which I accept), it will not dent the pressure of overall demand. Nor is sprawl remotely “sustainable” development. It requires new infrastructure and puts more pressure on roads and commuting. It is bad planning.
6 That high buildings are the answer. They are inefficient as the higher you build the more is spent on servicing. London’s most popular and economic housing is “high density/low rise”. Towers have supplied mostly empty pads for the rich, housing no one.
7 That the answer lies in new social housing. Security of tenure and low turnover – not to mention right to buy – renders the fixed stock of public housing inflexible and immobile. Increasingly it has become a generous donation by the taxpayer to a fortunate few, for life. It is largely irrelevant to acute homelessness.
8 That people have a “right” to live where they or their parents lived before. Localities benefit from stable populations, but conferring and bequeathing such a right to discriminatory subsidy is in no book of rights.
9 That there is also a “right” to home ownership. The state has a housing obligation for those who need help. Home ownership is capital accumulation, developed out of the Tories’ mortgage tax relief as a form of saving for old age and to endow offspring. It promotes inequality and cannot be termed a right.
10 That renting is stupid. Renting is buying a service. About 60% of Germans rent. They do not think of buying until their 40s. Booming Berlin has 90% of its population renting. Renting aids labour mobility and channels savings into productive investment. As a result, Germany has little house price inflation and no “ladder” advantage to owning not renting.
11 That buy to let is evil. The poorest people rent from the private sector. The more houses are available to rent, the more flexible is the housing stock and the lower are rents for those who do not buy. Whether buyers-to-let should enjoy tax breaks and whether rents should be regulated are quite different matters.
Facing these myths stand a few realities.
1 There is no “need” to build on rural land outside cities. Jobs, leisure and infrastructure are available in cities. We should not aid hypermobility with sprawl. Every city, in de-industrialising, leaves empty sites stuck in planning arguments or delayed decontamination. The London agents Stirling Ackroydhave identified sites for 500,000 houses in London without touching the green belt. People may like houses in the countryside, but that is preference not need.
2 The one massive reservoir of vacant residential property in Britain is under-occupied property and underdeveloped city land. London is awash with small houses and empty rooms, its residential density the lowest of any big city in Europe. Detached houses, spare rooms and gardens are the nation’s luxury.Britons had 1.5 rooms per person in 1981 and have 2.5 today, even as new housebuilding is declining. Freeing up this capacity should be the overwhelming goal of policy.
3 Tax makes it worse, not better. VAT discriminates in favour of new building and against the conversion of existing properties. Stamp duty is a tax on transactions, and thus on downsizing and more efficient use of space. Council tax is wildly regressive, promoting wasted space. Inheritance tax relief rewards hoarding.
4 Planning control is too strict. Permitting an extra storey, apartment or back extension on every existing property would drastically increase density and capacity. London can grow higher without growing high.
5 The most effective way to relieve housing poverty is through housing benefit, at present chaotically administered. Cash payments are more flexible and fit for purpose. They should extend to a new “public sector Airbnb”, geared to bringing vacancies to market.
6 The only way to force down rents and house prices in the south is to strain every policy sinew to make London poorer and the regions richer. That seems too radical for anyone.
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