Think tank calls for change to green belt and property tax to boost housing market

Free market reforms are needed to increase the supply of homes for sale in the UK to help tackle the nation’s housing crisis, according to a new academic paper published by a right wing think tank.

It calls for green belt land to be selectively re-classified where housing is most needed, for stamp duty and capital gains tax to be revised and reversed, and for permitted development rights for individual streets or villages to be introduced.

The report, written by Jacob Rees-Mogg, the new leader of the House of Commons, and Radmir Tylecote of the Institute of Economic Affairs, says that for over a generation the UK has built houses at a lower rate than any other country with comparable data, and in less than 50 years the average house price has risen four and a half fold after inflation. The report asserts that no other OECD country has experienced a price increase of this magnitude over the same period.

It argues that, as a result of increased state control in the market, the UK builds too few houses, which are too small, in the wrong places, and built in a way that is considered undesirable by the majority of British residents.

The report outlines how Government interventions have exacerbated the housing crisis, It says that the Town and Country Planning Act and other State led policies have created a complex and bureaucratic planning system, all contributing to the housing crisis.

It adds that local authorities have been denied incentives to allow more houses to be built and they are burdened with some of the costs of necessary new infrastructure and the additional administrative tasks.

According to the authors, excessive use of green belt classification prevents house building on large areas of land, even low quality land where people want houses to be built and local planning processes become so difficult that big, incumbent house builders take advantage, leading to identikit housing estates across the country, rather than the models of homes buyers and residents are happy with.

It also suggests that stamp duty penalises property transactions, impedes downsizing and harms labour mobility while the Government’s flagship Help to Buy scheme has increased house prices because it has inflated demand without increasing supply while tax on buy to let landlords has resulted in a fiscal strike on privately rented housing, reducing the supply of rented housing as alternatives to buying

The report advocates a comprehensive reform plan, which it suggests could be rolled out incrementally in one or two major cities first, for example Birmingham and Manchester, to trial the reforms and provide evidence that they are both beneficial and will not lead to negative equity for existing homes.

The plan includes cutting and decentralising tax, saying that stamp duty could be reduced to 2010 levels and then devolved so that local government has the capacity to reduce it further and this should make it possible for more people to upsize or downsize. It also says that VAT on maintenance and restoration harms supply and should be abolished, non-property inheritance tax should be cut to the level of property tax.

It argues that the green belt often fails to achieve its purpose of aesthetic and environmental preservation and has expanded well beyond what was originally intended and points out that some London green belt land is now 20 miles from a London borough. So, it suggests that areas of green belt that do not support a single one of the five National Planning Policy Framework purposes should be declassified, with a presumed right to development. It adds that releasing green belt land near transport hubs should be a priority

Rees-Mogg said:

‘Once Brexit is delivered, resolving the problems of the UK’s housing market will be the most important political challenge we face. Many young people, already struggling to afford to pay rent in the big cities, can only dream of buying their first home, and those who wish to downsize cannot afford to because of the inherent costs of doing so. It is clear the central planning of housebuilding does not work and something has to change.

‘This important report sets out a number of ways in which our sclerotic planning laws can be reformed to free up land for development in the places homes are needed, how tax can be cut and decentralised so as not to clog up or distort the housing market, and how planning powers can be devolved to local authorities to build and beautify our towns and villages. We now have the ideas with which we can relieve our housing shortage. All that’s left is the political will to do so.’

According to Tylecote, Britain’s lack of housing is arguably the greatest economic challenge of our times.

Tylecote added:

‘It is creating inequality and harming opportunities for young people. Radical action to build houses and increase home ownership is desperately needed. This report proposes a programme of decentralisation, tax cutting and releasing State owned land that can unlock the promise of property ownership for a new generation.’


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