Support housing, not house prices

Dan Groves

Shelter, a basic need in life. Without good quality affordable housing for all, our society will have people struggling and those people will inevitably be those on the fringes, the vulnerable.

Since 2010, the Coalition and Conservative Governments have poured money into the housing market in the form of subsidies to first time buyers through schemes like Help to Buy. They have cut taxes through Stamp Duty relaxations; either through changes to the rate of Duty or increasing the thresholds.

The impact of these schemes has been to increase the price of houses. Sadly, they add to inequality in society, especially inter-generational inequality as parents and grandparents who can help their children frequently do.

Individuals and couples have been given a leg up on to the housing ladder. Parents and grandparents of the first-time buyers recognise the joy that this brings to their family, as they see their loved ones moving through one of life’s stages. It is not surprising that these schemes and subsidies garner some political support.

I haven’t benefited from any of these schemes directly, however, my house has risen in value as a result. If we put more money into a product that is limited the price goes up. The result is that homeowners sit on assets that are increasing in value and at a greater rate of growth than earnings, increasing inequality.

The building that provides our basic need for shelter, is also this country’s biggest store of wealth. If we include landlords, housing has three societal/economic purposes: a provider of shelter, a storage of wealth and an income generator.

The Nationwide estimate that a house of £250k in Q2 2020 in Wales has risen by 13% in the past year or £33,000. That’s great for home owners until you come to buy your next house and that has gone up by £30-£100k as well, so it is more difficult to afford.

For those not owning their homes it means that they are likely to find it even harder to afford housing and landlords, needing a return on their investment, will require higher rents or will spend less on their upkeep. All of this adds to inequality in our society.

So how about we stop the subsidies to the housing market and use the money to build more houses, increasing supply, slowing price growth and making them more affordable to more people. If we are bold, we could take some money out of the housing market when people sell their homes and use that money to build more, improving the quantity and quality of houses helping everyone. Better housing reduces the need for public services by improving health, reducing crime, and even improving educational attainment.

Dan Groves is a Welsh Fabians Executive Committee Member

The Fabian Society in Wales