1. END RISING HOUSE PRICES
Housing is too expensive. Prices and rents have risen beyond what any reasonable person would think of as a fair amount to spend on one of the most basic of human needs. The way for them to get more affordable is for the costs to stop rising, so that wage rises have time to catch up.
Why house prices?
There are a lot of ways to measure the affordability of housing.
We could look at rents. In some ways this would be an easier metric to use because they aren’t so affected by speculation or the availability of credit.
But we don’t want to give up on homeownership. Just because right now it might be a distant dream for many shouldn’t mean that we cease fighting for what was once the norm to be possible again for people to afford without help from rich parents.
We could look at monthly mortgage costs, or deposits needed. These might be truer reflections of affordability in terms of access to homeownership - after all, if you can cover the upfront costs and pay the mortgage, who cares what the price is?
But we don’t think it’s right to have to spend eight years of your life working just to cover the cost of buying a home for yourself. Housing being such a money sink over the life course - for those not lucky enough to inherit housing or get a lot of help from mum and dad - entrenches inequality and keeps people from spending their income on other things that would enrich their lives.
So we want house prices to stop rising. Not for a month, or for a year. For as long as it takes for homeownership to be affordable for average people in the areas they want to live.
We need an end to price rises set as a target at the highest level. Although we’ve had some policy wins in the last few years, it’s not clear government understands what is obvious to most people - that for housing to become affordable the cost of housing needs to stop rising.
This isn’t helped by the framing of housing costs by the media. When the price of food increases, this is inflation. When the cost of transport increases, this is inflation. Energy bills rising? Inflation. Higher price tags on clothes? Inflation.
But for some reason when homes become even more out of reach for aspiring first time buyers this is called “growth.”
We need government to commit to ending this “growth” so that no one will be in any doubt: house price inflation is a bad thing.
This is possible
With the right policies, government can make sure this happens. Our manifesto for housing comprises the following strands:
We need to build at least 300,000 homes a year, focused in high demand areas so supply begins to meet demand. To do this we need to
Overhaul planning legislation
Build social housing
We need to reform property taxes so they’re fair and create positive incentives
We need to make renting better and strengthen renters’ rights so those priced out of homeownership have greater security and landlords are deterred from hoarding housing.
2. BUILD MORE HOMES
Our policies in brief:
Reform planning by scrapping our system of politicised, discretionary, development-specific permissions, and allowing developers to get on and build on their land, so long as they conform to building safety regulations, locally set rules including Local and Neighbourhood Plans, and national planning guidance.
Invest £12.8bn a year in building social housing.
Make developers pay a flat tax on the homes they sell to fund on-site affordable housing.
We need to be building 300,000 homes a year in areas of high demand. Every year we don’t do this is a year we dig ourselves deeper into our crisis.
Commentators often quarrel about what affects housing affordability as if it is only determined by one factor. For example, a frequent argument is that because the cost and availability of credit clearly affects house prices, they are exempt from the usual laws of supply and demand (although credit is just one piece of the demand side of the equation). The fact is, study, after study, after study, after study has found that more homes reduces housing costs.
Even if building homes made no difference to affordability, it would still be a good idea. The difference in rents between a low demand area and a high demand area shows that there is effectively a queue of people who want to move but can’t afford to. Building a home in an area people want to live in will help one household improve their lot.
Our current planning system is an absurd way of going about delivering homes in a sustainable and socially beneficial way. In the context of a housing crisis which sees millennials spending £44,000 more in rent over the course of their twenties than baby boomers did at the same age, simply by virtue of being born in a time when housing is too scarce in the areas people want to live, it is utter madness that every single home we build is subject to a political approval process in which local residents (who by definition are lucky enough to already have homes in the area) get a say, but the beneficiaries of the new homes (who may be scattered around the country) do not.
We need to totally overhaul the UK’s outdated, backward planning system. To do this we should abandon the concept of planning “permission” for specific developments. No one should need permission to meet a basic human need.
This does not mean anyone should be allowed to do whatever they want with the land they own, regardless of the effect on the local area. There should be clear rules in place about what can be built and where. The existing Local Plan framework should be reformed so that Plans designate areas for development and areas where development is prohibited. For the areas that are zoned for development, there should be transparent rules about what cannot be built there - which could include what the developments are used for, and rules on look and feel - with everthing that does not contravene these rules allowed. Alongside this we already have extensive national building regulations, rules on the sustainability of developments, and various other regulation which is already in place.
The difference would be that rather than enforcing these standards with an inconsistent and discretionary system which is both difficult to navigate and inherently biased towards existing homeowners and local residents, there would be a transparent set of criteria which would leave landowners and other stakeholders in no doubt about what they can do with their land.
And local politicians would be taken out of the process. Planning officers would only need to determine whether an application for a new development is in keeping with the published rules.
But what about local democracy
Proponents of the current system may argue that a political approval process for determining what can be constructed is necessary for democracy. Land, they may argue, both affects and is affected by its surroundings in a way that inherently lends itself to a system where its use is restricted by local people. Its value is determined by its proximity to jobs and amenities, and what is on top of it directly affects the people around it because they have to face the negative externalities of what is built there, be they environmental, financial, or aesthetic.
But in a world with rule-based planning and no scheme-specific approval process, land use could still be determined democratically, just less continually. Local politicians would oversee the Local Plan process, and constituents could vote them in or out as they wished based on these Plans. And the Neighbourhood Plan process, which allow very localised areas to determine the direction of, and limited specifics for, the development that happens locally, allow residents to shape some of the direction of local development (although they should not be allowed to determine whether or not development is permitted at all). In this system land use and development would still be based on democratic mandate.
Create Streets call this “moving the democracy upstream.” We believe this is a far better model than the current haphazard system in which local people have undue sway on every new development at the expense of people who live elsewhere.
Building social housing
Government also needs to invest more money in social housing. There are 1.1m households on social housing waiting lists in England, and not enough homes are being built for them. Building these homes doesn’t just help the family that moves in - they increase the overall housing supply and reduce rents and prices for everyone else just like building market housing does. To build the low rent homes we need, government should be investing directly in social housing. The cost of building the affordable homes we need has been put at £12.8bn a year. This money would pay for housing associations and councils to buy land and build a range of affordable tenures on it, including the most necessary: low rent homes.
But it’s not just government who should pay for social housing. Developers and landowners who profit enormously from the housing crisis should pay their fair share too.
We already have a system of developer contributions to affordable housing, in the form of section 106 agreements (s106). These agreements are the result of negotiations between local councils and developers, the basis of which are viability assessments, which factor in the policies of the local or regional authority, as well as the specifics of the site in question. This allows for huge inconsistency in the provision of affordable housing.
We should move to a system that removes negotiation from the process and fixes affordable housing provision, so that submarket housing is delivered consistently. Developers should pay a flat tax on the gross development value of each scheme they build, which the local council would use to buy homes in the block for use as affordable housing. This would give developers more certainty, and could provide more submarket housing as there wouldn’t be room to negotiate it down.
This increased affordable housing requirement should ultimately be priced into what developers are willing to pay for land, so in the long run the only losers would be landowners, whose wealth is largely unearned anyway.
3. MAKE RENTING BETTER
The reality is that while house prices remain artificially high and social housing is in short supply, many people will be spending their lifetime renting from private landlords. In the last two decades, the proportion of English households living in the private rented sector has doubled to 19%.
Renters in the private rented sector pay the highest proportion of their income on housing, have the lowest levels of satisfaction with their tenure, and experience the poorest housing quality and safety. Private renters in England have far less protection from eviction and unconstrained rent increases than other countries in Europe (and even other countries in the UK). This creates a vicious circle by driving demand for buy-to-let properties, increasing house prices and speculative buying, and making it harder for renters to buy their first home.
We need reform of private renting which will:
Make the private rented sector a better place to live for those who are trapped there
Reduce the demand for buy-to-let and speculative investments in property.
Ending no-fault evictions and introducing open-ended tenancies
England has some of the worst tenancy security in Europe. Tenants can be evicted with as little as two months’ notice, without the landlord needing to provide a reason. Protections from revenge eviction - where a tenant is evicted for complaining about the property - are also extremely limited, meaning tenants may avoid reporting maintenance issues. Eviction from private renting is now the leading cause of homelessness.
We need an end to Section 21, or “no fault” evictions. Tenancies should be open-ended by default and landlords should be able to evict only in limited circumstances.
Improving quality and safety in private rented housing
At present, tenants have few routes of redress for landlords who do not adequately maintain their properties. Local authorities should put tenants at the heart of their licensing schemes and invest in more enforcement of good standards in the private rented sector. Landlords who do not meet basic standards of property maintenance should be required to issue refunds of rent to their tenants.
Keeping private rents affordable
Private renters pay the most on housing costs out of any tenure. In many areas of the country average rents are far out of the reach of those on lower, and even middle, incomes. In some areas renters have no choice but to share properties or even rooms late into adulthood, accept poor quality accommodation, or live far from their areas of choice.
Building enough homes to meet demand and prevent house price inflation will also stabilise and reduce rents. However, boosting supply will take time and in the meantime many are stuck in unaffordable private rental housing now. Many other countries have introduced some form of rent control or rent stabilisation measures to help renters. We need to look at the substantial evidence coming out of these countries to identify how rents and rent inflation can be limited, without impacting on the availability or quality of housing.
Additionally, those on low incomes often do not receive appropriate welfare support. Reductions to the Local Housing Allowance (LHA) element of Housing Benefit and Universal Credit have meant that in some areas of the country, benefits can no longer cover the rent. This can directly lead to poverty and eviction for some of the most vulnerable people in the country. We are calling on government to increase LHA so that low-income renters can find and afford a suitable property to their needs.
4. REFORM PROPERTY TAXES
Our current system of taxing housing in England is completely backwards. Through stamp duty we tax - and therefore disincentivise - housing transactions, gumming up the housing market and punishing people who move home. And through disastrously regressive council tax we take more money from poorer people than richer people relative to their property values.
These two bad taxes conspire to make moving expensive and not moving - particularly in areas of the highest demand - cheap. And instead of taxing the unearned wealth of those who already own their homes, we tax buyers and occupiers who may not be so lucky.
But isn’t stamp duty really paid by sellers rather than buyers?
It’s true that although it’s buyers who pay stamp duty, the incidence of the tax falls on sellers. Or to put it another way, cutting stamp duty would increase prices. But stamp duty is still a problem for housing availability and affordability - a more liquid housing market and more homes for sale at a given time means more access to more housing for more people.
But isn’t it fair that council tax is paid by occupiers, because it pays for services for residents?
Council tax is paid to local authorities to cover the cost of services like local emergency services, environmental health, rubbish collection and more. But although these things are for residents’ benefit, the owner of the home or the land is benefiting too, by being able to charge a rent which accounts for the fact that the local area has these services. It’s them who should pay for it.
How should property be taxed?
Stamp duty should be scrapped completely for all except buyers of buy-to-let investment properties and buyers of second/holiday homes. The £12bn revenue stream should be rolled into continuous taxes on housing.
Council tax should be completely overhauled and a new property tax introduced in its place, which taxes a flat rate on the value of the home, paid by the owner/freeholder instead of the occupier.
This system has a number of benefits compared to the status quo:
Taxes will become fairer. Currently the highest value homes are taxed at around 0.1% of their value each year, whereas the lowest value homes are taxed at around 2%, because council tax bands are based on outdated data from the 1990s.
If continuous taxes on homes increase, the additional costs will be priced into the cost of the home. This means that house prices would fall, amounting to a transfer of wealth from today’s owners to tomorrow’s buyers.
This system is a stepping stone towards a land value tax. Taxing the value of land rather than property is advantageous because it doesn’t interfere with decisions the owner/freeholder takes about the built home(s). For example, a tax on the value of the property would disincentivise building an extension, or densifying to deliver more housing.