Leading article: It will take more than words to make property affordable

Share
Related Topics

Britain, at last, has a housing minister who recognises that it is not his job to sit idly by while housing becomes more expensive. In an interview at the weekend, Grant Shapps identified the social problems created by house price inflation very well: a generation of young people with scant prospect of ever owning their own home.

It is gratifying to hear a minister argue that Britons should regard a house primarily as a place to live, rather than an investment. And it would indeed be desirable, as Mr Shapps says, if the general cost of housing increased by less than earnings each year. He might have added that by sucking up so much of our national income, expensive housing distorts investment. It means that cash flows into unproductive bricks and mortar, rather than into those new enterprises that would make Britain, as a whole, more prosperous.

But the question is: will the Coalition do what is necessary to achieve a saner housing market? House prices are expected to decline in the immediate term as the banks reduce their lending to first-time buyers. Yet in the longer term there are still powerful structural economic incentives for people to engage in housing speculation.

There are ways that the state can curb prices. It could increase taxes on housing, perhaps by imposing capital gains tax on first homes, or a land value tax. This would reduce the profits from speculation in housing. It could build (or encourage the building of) more houses. Increasing the supply of housing would depress prices. It could reform the rental laws to make long-term renting easier (as it is on the Continent). Rent reform would reduce the profitability of being a landlord, thus taking some air out of the buy-to-let market which has contributed substantially to house price gains in recent years.

The obstacles to these reforms are political. A great many Britons (particularly older generations) have done well out of expensive housing. Since a large part of their wealth remains bound up in housing, they have a vested interest in seeing prices continue to rise. And these social groups tend to have a louder political voice than those who are presently being penalised by unaffordable housing. The angry response to Vince Cable's suggestion of a mansion tax at the Liberal Democrat conference in 2009, and the fact that the policy subsequently failed to make it into the Coalition agreement last May, was a demonstration of the power of this lobby.

The Coalition has tied its own hands, too. Ministers have taken a gamble that, despite the spending cuts, the economy will make a rapid return to strong and sustained growth over the course of this Parliament. Any sort of housing market correction over the coming years could undermine consumer confidence and damage short-term growth. The Treasury is going to be extremely wary of any policies – particularly on housing – that could interfere with its immediate economic goals.

Mr Shapps talks of increasing incentives for house-building. Yet the carrot alone will not be sufficient. To increase the supply, ministers will also need some stick. They must face down powerful local lobbies (which tend to be made up of those who have an interest in maintaining high house prices) opposed to building projects in their area. That one of the Coalition's first acts was to announce the end of Labour's regional house building targets is not an especially encouraging sign.

Mr Shapps has reached the first stage of recovery by admitting that a problem exists in the housing market. But he should be aware that without accompanying remedial action, that recognition will count for precisely nothing.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Ashdown Group: Application Support Analyst- (Customer Support) - £29,000

£29000 per annum: Ashdown Group: Application Support Analyst- (Customer Suppor...

Recruitment Genius: Laser Games Supervisor

£14500 - £15000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: PPC Executive / Manager

£22000 - £28000 per annum: Recruitment Genius: A PPC Executive/Manager is requ...

Ashdown Group: Service Delivery Manager - Retail / FMCG / WMS Operations

£55000 per annum: Ashdown Group: Service Delivery Manager - Retail / FMCG / WM...

Day In a Page

Read Next
The Independent journalist James Moore pictured outside Mile End underground station in east London  

From ‘coloured’ to ‘cripple’ - some words just don't belong in everyday language

James Moore
Marina Litvinenko, the widow of former KGB agent Alexander Litvinenko, leaves the High Court after the opening of the inquiry into his death  

Laying the blame for Litvinenko’s death at Putin’s door is an orthodoxy that needs challenging

Mary Dejevsky
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee
World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

Max Brooks honours Harlem Hellfighters

The author talks about race, legacy and his Will Smith film option to Tim Walker
Why the league system no longer measures up

League system no longer measures up

Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
Valentine's Day cards: 5 best online card shops

Don't leave it to the petrol station: The best online card shops for Valentine's Day

Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

Devil in blue Costa is a reminder of what Liverpool have lost

The Reds are desperately missing Luis Suarez, says Ian Herbert
Ashley Giles: 'I'll watch England – but not as a fan'

Ashley Giles: 'I'll watch England – but not as a fan'

Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness