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.
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.
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.
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.
You’re absolutely correct that it’s not solely an issue of landlords buying up property that’s causing the shortage. I was just providing a possible legislative method to cut down on the number of properties being owned by speculators and corporate landlords.
There simply isn’t enough housing being built for the population growth we’ve been seeing. That’s 100% going to lead to an increase in prices.
In cities outside of London though there isn’t always that same pressure (i.e. Liverpool still has a housing surplus), so why are housing costs rising past the point where people can afford to buy them? Supply and demand should mean that prices remain affordable for most people but they aren’t.
A large number of rental properties are rented by investors of one form or another, if we can cut down on homes as speculative assets we should see more homes being sold to homeowners and prices fall back to more manageable levels for everyday people.
There are loads of other problems such as the UK building houses instead of things like apartments, planning permission bs, NIMBYism, economic activity being focused in the south, homeowners not wanting their valuations to go down, etc etc which are all part of the puzzle. Ensuring that more homes are owned by residents rather than investors can only be a good thing though imo.
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?
I think if it’s a first time build you could work something out to not punish developers for building houses which take a little time to sell, but you’d also want to avoid developers building and sitting on properties. That will probably already happen though as they’ll want to recoup construction costs asap I imagine. For portfolio property buyers they’ll be incentivised to sell which is only a good thing.
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.
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?
Well there are 4 million rental properties in the UK so your numbers don’t quite add up. A very significant number of properties are purchased and rented as investment assets. No one is saying that ending landlord property portfolios will magically fix the issue overnight, but it certainly adds inflationary pressure on house prices and prices normal people out from being able to purchase homes. Houses should be homes first, not speculative assets.
Through taxation policy it should be possible for a family to move home and rent their old one, or rent an inherited one whilst waiting to sell, etc without much additional burden. But we shouldn’t encourage private entities pricing out normal people from homes and forcing entire generations to only be renters.
The economic damage from high house prices and lack of generational wealth is way too expensive to allow this portion of the market to continue. Simultaneously we need to be building a fuckload more homes, yes, but there being other things to change shouldn’t dismiss other helpful ideas.
The EHS defines these as “homes that are primarily used as holiday homes (by family, friends or let to others as a holiday let) or are occupied while working away from home.”
This clearly doesn’t include regular rental properties, so I don’t see how it shows landlords are not a problem.
Respectfully, I think that’s a safer assumption than the UK nationalizing the housing market, but by all means, feel free to wait for that if you like.
But even to play along, even if you could snap your fingers and abolish the housing market, the question of allocation doesn’t go away. You’ll still have certain units that are extremely desirable and valuable, others that are quite good, some that are fine, and some that are terrible. In other words, even in the absence of the market, inherent value will still drastically differ from unit to unit and location to location. So, if you’re not using money to allocate things, how do you do it? What do you do if demand outstrips supply?
Okay, let’s explore this. Everyone votes for themselves to live in London’s best penthouse. Crafty clever me, expecting this situation, bribe a few of my friends to vote for me to live in the penthouse instead. Perhaps I slip them some money under the table - or if we’ve abolished money - I promise to do some amount of work for them, give them something valuable I have, promise to cook for them, whatever. So, I’ve got the penthouse. Yay democracy?
Or, to expand more, lots of people recognize this strategy, so everyone with some degree of wealth starts buying votes anywhere they can get them. Ultimately, the people with the most wealth wind up getting the best housing as loads of goods and favors get exchanged. At this point, oops, you have a market again.
Now, you might just say that it should be randomized. But in that case, if I get assigned a shitty unit, perhaps I might just go to someone who got a nice unit and offer them an exchange of some kind. Perhaps I don’t have any valuable goods, but I’m a talented painter and offer to paint them several nice pieces. Ultimately, they find it to be an acceptable deal and agree to swap apartments. Lots and lots of people would be doing the same thing, and as the government wouldn’t actually be able to monitory everyone’s location all the time to ensure they’re living where they’re supposed to be, once again, you have a market.
That’s a severe lack of imagination concerning democracy, man. It isn’t just voting for which house you want. It’s coming to an agreement about how houses are distributed.
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.
Oh for sure, it’s far too simple to just impose a limit. And if any limits imposed are too punitive, as you say, they’ll likely do more harm than good.
My main point is that a lot of people read this as a simple problem of mis-allocation of existing housing stock, when essentially all economists agree that the fundamental issue is a lack of total supply. London alone has added two million residents since the year 2000, and I’m very doubtful that it has also added two million new apartments.
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.
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.
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.
You’re absolutely correct that it’s not solely an issue of landlords buying up property that’s causing the shortage. I was just providing a possible legislative method to cut down on the number of properties being owned by speculators and corporate landlords.
There simply isn’t enough housing being built for the population growth we’ve been seeing. That’s 100% going to lead to an increase in prices.
In cities outside of London though there isn’t always that same pressure (i.e. Liverpool still has a housing surplus), so why are housing costs rising past the point where people can afford to buy them? Supply and demand should mean that prices remain affordable for most people but they aren’t.
A large number of rental properties are rented by investors of one form or another, if we can cut down on homes as speculative assets we should see more homes being sold to homeowners and prices fall back to more manageable levels for everyday people.
There are loads of other problems such as the UK building houses instead of things like apartments, planning permission bs, NIMBYism, economic activity being focused in the south, homeowners not wanting their valuations to go down, etc etc which are all part of the puzzle. Ensuring that more homes are owned by residents rather than investors can only be a good thing though imo.
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?
I think if it’s a first time build you could work something out to not punish developers for building houses which take a little time to sell, but you’d also want to avoid developers building and sitting on properties. That will probably already happen though as they’ll want to recoup construction costs asap I imagine. For portfolio property buyers they’ll be incentivised to sell which is only a good thing.
That is far too lenient on the landleeches
Just seize them and kick them out on their arse
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/
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?
Well there are 4 million rental properties in the UK so your numbers don’t quite add up. A very significant number of properties are purchased and rented as investment assets. No one is saying that ending landlord property portfolios will magically fix the issue overnight, but it certainly adds inflationary pressure on house prices and prices normal people out from being able to purchase homes. Houses should be homes first, not speculative assets.
Through taxation policy it should be possible for a family to move home and rent their old one, or rent an inherited one whilst waiting to sell, etc without much additional burden. But we shouldn’t encourage private entities pricing out normal people from homes and forcing entire generations to only be renters.
The economic damage from high house prices and lack of generational wealth is way too expensive to allow this portion of the market to continue. Simultaneously we need to be building a fuckload more homes, yes, but there being other things to change shouldn’t dismiss other helpful ideas.
This clearly doesn’t include regular rental properties, so I don’t see how it shows landlords are not a problem.
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.
You’re assuming there would still be a “market” in this scenario ;)
Respectfully, I think that’s a safer assumption than the UK nationalizing the housing market, but by all means, feel free to wait for that if you like.
But even to play along, even if you could snap your fingers and abolish the housing market, the question of allocation doesn’t go away. You’ll still have certain units that are extremely desirable and valuable, others that are quite good, some that are fine, and some that are terrible. In other words, even in the absence of the market, inherent value will still drastically differ from unit to unit and location to location. So, if you’re not using money to allocate things, how do you do it? What do you do if demand outstrips supply?
A democratic institution run by the people.
Oh, did I not mention this would take place after a revolution by the people, overthrowing the bourgeois state establishment?
I do not trust Rishi to oversee this, or Keith.
Okay, let’s explore this. Everyone votes for themselves to live in London’s best penthouse. Crafty clever me, expecting this situation, bribe a few of my friends to vote for me to live in the penthouse instead. Perhaps I slip them some money under the table - or if we’ve abolished money - I promise to do some amount of work for them, give them something valuable I have, promise to cook for them, whatever. So, I’ve got the penthouse. Yay democracy?
Or, to expand more, lots of people recognize this strategy, so everyone with some degree of wealth starts buying votes anywhere they can get them. Ultimately, the people with the most wealth wind up getting the best housing as loads of goods and favors get exchanged. At this point, oops, you have a market again.
Now, you might just say that it should be randomized. But in that case, if I get assigned a shitty unit, perhaps I might just go to someone who got a nice unit and offer them an exchange of some kind. Perhaps I don’t have any valuable goods, but I’m a talented painter and offer to paint them several nice pieces. Ultimately, they find it to be an acceptable deal and agree to swap apartments. Lots and lots of people would be doing the same thing, and as the government wouldn’t actually be able to monitory everyone’s location all the time to ensure they’re living where they’re supposed to be, once again, you have a market.
That’s a severe lack of imagination concerning democracy, man. It isn’t just voting for which house you want. It’s coming to an agreement about how houses are distributed.
I don’t think landlords as a concept are a completely bad idea
There is no good reason to own a home you don’t live in.
There is a good reason to not buy a home that you live in though
Lol
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.
Oh for sure, it’s far too simple to just impose a limit. And if any limits imposed are too punitive, as you say, they’ll likely do more harm than good.
My main point is that a lot of people read this as a simple problem of mis-allocation of existing housing stock, when essentially all economists agree that the fundamental issue is a lack of total supply. London alone has added two million residents since the year 2000, and I’m very doubtful that it has also added two million new apartments.
That’s not the issue though.
Arguably it is. The root cause is the same - treating basic necessities as investment vehicles
Land lordship is a time honored tradition in England.