Okay, hear me out here. Maybe we should stop treating housing as a commodity and allowing companies and individuals to accumulate large property “portfolios”?
Because this is the fucking problem; homes are not commodities to hold in a portfolio, they’re homes for people to live in.
The UK seems to have this as a recurring problem, we are the only modern economy that has a fully privatised water supply, something which is essential for human existence. Housing is a basic right, yet we allow massive profit to take priority over that.
This is a good idea but I have no idea how they would implement that in law
Could be done fairly easily via the tax system. Each additional property you own increases the income tax on any rent and the capital gains tax when selling it. Bump up council tax for empty properties massively too and the market should correct itself with minimal direct intervention.
Set it up so having a second home means paying more for it, having 3 or 4 or 10 means it’s not profitable to keep it at all.
The core question here, which I genuinely don’t know the answer to, is how much of the supply crunch is being caused by the additional properties of individual parties? Are there really that many second, third, etc. homes in the UK?
Just from some quick looking, it seems like London’s residential vacancy rate is something to the effect of 3%, so I’m inclined to think that the core problem is more lack of total supply rather than poor allocation of existing supply. We’ve seen cities boom all over the world in the past 20 years, but new construction hasn’t remotely kept up with the pace of population growth. This is the pretty inevitable result.
Edit: Just to add numbers, London’s population has grown by nearly 2 million since 2000. I would be highly skeptical that two million new apartments have been added in the same time. Add in the fact that a lot of those 2 million people are educated high-earning professionals, and this is what necessarily happens. When demand exceeds supply, price goes up. When the people driving that demand are relatively wealthy, price goes up a lot.
I read an article a few years ago about how some luxury London flats were sold indirectly - you purchased a company (which did nothing) and gained all their assets (which consisted of only one flat). You didn’t own the flat, you owned a shell company which owned it; it’s the same problem as having the wealthy create companies to avoid income tax. I think massive taxation for extra property ownership is a great idea, but I have no idea how you make it work.
Okay, but how does it work when a company owns a house? If a property developer builds a load of houses, wouldn’t they be incentivised to sell the house for more to recoup the penalty to them?
It wouldn’t be because people owning multiple houses is not the issue. Going to have to paste my usual response from Reddit to people thinking that landlords and second houses are the problem.
https://commonslibrary.parliament.uk/research-briefings/cdp-2022-0001/
In total, the EHS estimates that English households owned 873,000 second homes, of which 495,000 were second homes located in the UK.
https://citymonitor.ai/government/england-short-4-million-homes-here-s-how-we-can-build-them-3921
And there are 27.8 million homes in the UK, and we are apparently short 4 million.
So we ban second homes and that releases almost 450,000 houses which is less than 2% of the housing stock and we are still short 3.5 million houses, now what do we do?
Abolish landlording completely
Or, in legal terms, “an entity may not own a home if they cannot demonstrate that they occupy the residence for more than 10 months a year”
You’re assuming that this would magically drop all property prices to be affordable by all people, which is not at all self-evident.
Put a cap on the maximum value a house can be based on bedrooms / floorspace? It’ll never happen since those in power won’t want their million pound houses suddenly being worthless.
That’s categorically impossible, because value in an economic sense is not determined by any one person.
You can put limits on price, but that’s a very different thing, and has several downstream effects that are often negative. If you mandate that the price be below an asset’s actual value, the owner is highly incentivized to either sell it in less legal ways, or simply not sell it at all and wait until regulations change or they find some other way of getting its true value. In the basic context of real estate, for instance, you might just meet with people, reject all offers, and then sell the house to a friend who agrees to “gift” you some extra money for it.
If, in a rental context, you mandate that rents remain below the cost of ownership from mortgage and maintenance, you incentivize the owner to do things like never do any maintenance (because what’s the tenant going to do? Lose a rent controlled apartment?). You incentivize builders to never build anything, because rents won’t be high enough to recoup costs. Some particularly bold landlords may even try to deliberately destroy their units as a way to get rid of an expensive asset (see upper Manhattan in the 70s, where many buildings “mysteriously” burned down).
Price != Cost != Value. Failing to understand this causes a lot of broken analysis.
