The UK housing crisis - A little more legislative tinkering
When Theresa May stepped into power in 2016, she announced that solving Britain’s housing crisis was a personal mission. Successive UK governments before her had tinkered with housing policy but arguably, without effecting fundamental change.
Giving further indication as to what we might be able to expect from the Budget on the 29 October, at last week’s Conservative Party Conference, the Prime Minister made another attempt to combat the housing crisis introducing yet another Stamp Duty Land Tax (SDLT) surcharge that will apply to foreign purchasers of UK property. Proposing a rate of between 1 and 3%, this would operate in addition to other recent SDLT surcharges that apply to second homes and enveloped dwellings.
The announcement was met with dismay by major property developers who saw their share price drop several percentage points in the wake. The concern however is that this action is just yet another plaster over a problem rather than dealing with the root cause of the issues. The property developers who’s share prices was affected were the sort that provide high-end London property however, and not the types of property that May should surely be attempting to free up.
This begs the question – are we really addressing the underlying issues regarding this crisis? And in making these changes, is the full impact of things like Brexit, and broader social issues such as tuition fees being considered part-and-parcel in the evolution of these problems.
Young people still really want to get on the housing ladder and most can’t afford to, faced with the initial challenge of saving for a deposit. Many first-time buyers will be university graduates and according to the Institute of Fiscal Studies, in 2017 the average student in England was graduating with debts of over £50,000 – those from poorer backgrounds were incurring more, with more loans available to them. This leaves scarce capacity to save for a deposit.
Rents charged by landlords of the “buy to let” generation, add to the burdens of first-time buyers. This is where governments have done the most tinkering over the years, with the 3% Stamp Duty Land Tax surcharge on second homes, tax relief on mortgage repayments being gradually withdrawn and the scrapping of the wear and tear allowance. While many of these policies were intended to discourage further investment in residential property or even offer up hope that these additional burdens would release some of these properties onto the market for sale, it can in fact be argued that rents have merely been hiked up to compensate for the increased costs.
And Brexit…well most debates can often be brought back to Brexit somehow. Labour is a key issue for many construction firms. Estimates from the Annual Population Survey show that 7% of workers in the construction industry in the UK are EU27 nationals, rising to 28% in London. If Brexit puts EU workers off coming to the UK or indeed a points-based immigration system is introduced, we could see labour costs rising significantly. If demand for construction remains high, this could be a concern.
The construction industry is already in a fragile state with the skills shortage potentially pushing up costs aside, the price of materials is also rising, largely as a result of the fall in sterling. Anything being imported from the EU and further afield has become more expensive and unless a construction firm has defined these costs in its contracts, it will have to bear the additional expenses. May’s announcement threatens the industry further and it remains to be seen to what extent this announcement is further addressed in the Budget.
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