Academic journal article National Institute Economic Review

Housing Policy and the Changing Tenure Mix

Academic journal article National Institute Economic Review

Housing Policy and the Changing Tenure Mix

Article excerpt

The paper discusses the many reasons why housing policy can appear to be both incoherent and ineffective--with too many Departments involved each with different objectives and a plethora of policies pulling in different directions. Drawing on earlier research findings the paper discusses three examples which have impacted on tenure mix--the growth in the private rented sector where policy initiatives--except for unintended side effects--have been limited and market and macroeconomic pressures have dominated; a range of tax anomalies which provide inconsistent incentives and generate considerable costs to the economy; and the impact of specific policies which concentrate on supporting owner-occupation through new build initiatives. The paper concludes by asking whether housing policy is inherently unable to withstand the pressures placed on it by both politics and macroeconomic realities.

Keywords: housing policy, private rented sector, housing taxation, new build, owner-occupation.

JEL codes: H11, H24, H31, H44

Introduction

Housing is once again rising up the political agenda. The Ipsos Mori Issues Index in March this year suggested it is now the fourth most important issue facing Britain --its highest position since 1974 and very much higher than in 2010 (Ipsos Mori, 2018). This concern is reflected particularly in government policy to ensure a massive increase in new house building; but also to provide more social housing; to improve access to owner-occupation; and more generally to help younger people find affordable homes. In other words housing policy is expected to solve the housing problem by a range of interventions involving planning, modifying the construction process, taxation and specific initiatives to support consumers and providers.

Yet this avoids the question as to whether housing policy is actually capable of addressing these issues--given the economic and political environment and, in particular, the accretion of existing policies in which it has to function. In this paper we look at some of these questions--looking first at who actually determines policy and then at three examples--of the limitations of policy intervention in the face of market pressures, notably in the context of private renting; of its inconsistency with respect to the messages it sends to stakeholders particularly with respect to the taxation of housing; and the impact of particular initiatives to expand new supply and support owner-occupation.

A starting point is the Government's 2017 Green Paper 'Fixing Our Broken Housing Market' (DCLG, 2017) the title of which in itself raises three issues: is it broken; how is it broken; and will the emphasis on new build actually fix it? First, it is almost certainly still the case that the vast majority of households are happy with their housing conditions--although the question is no longer asked on a regular basis. Importantly, the Ipsos Mori survey shows that concerns are very much stronger in London and to a somewhat lesser degree in the South than in the Midlands and the North. This suggests that the concerns in many parts of the country are more related to affordability and access than to new build as such. Moreover the econometric evidence shows that any levels of new build that are within the range of possibilities will have relatively little direct impact on house prices and affordability--hardly surprising seeing that new additions have accounted for less than 1 per cent of the total stock for decades.

Who makes housing policy?

One big issue for housing policy is who is in charge? Housing policy is technically the remit of the Ministry of Housing, Communities and Local Government. But any policy that involves taxation or subsidy needs at least the agreement of the Treasury--and indeed is often led by them as, for instance, is the case with respect to Help to Buy, which was first announced in the 2013 Budget by George Osborn. …

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