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New report from Positive Money shows homeowners happy for house prices not to rise

Author: Trust for London

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A new report from Positive Money, funded by Trust for London, examines the real causes of the housing affordability crisis and proposes new policy approaches to tackle the true issues.

Despite the economy still being in recovery from one of the worst economic contractions in 300 years, house prices have continued to soar. This widening gap between the housing market and the rest of the economy is a symptom of the UK’s longstanding housing crisis. Positive Money exposes the root causes of why genuinely affordable homes are out of reach for a growing majority of people, the uneven impact of this broken system across different demographics, and start to explore positive proposals for change.

A majority (54%) of British homeowners would be happy if their own home did not rise in value in the next ten years if it meant houses were more affordable for those who don’t own property, according to YouGov polling commissioned for a new report on Britain’s housing crisis, published today by research and campaign group Positive Money.

The report, ‘Banking on property’, debunks the dominant narrative that inflated house prices are primarily the result of a failure to build enough homes. Rather, the authors argue that the rapid house price growth of recent decades has been driven by the transformation of homes into financial assets, through a loosening of financial regulation and monetary policy, as well as wider policy changes such as tax incentives, right to buy and the deregulation of the private rental market. 

Positive Money’s YouGov polling indicates that the majority of the British public – including a majority of homeowners – are in favour of bold reform. As well as most homeowners being happy for house prices not to increase:

  • Two-thirds of Britons (66%) support the Bank of England being given a target to keep house price inflation low and stable in the same way it does consumer price inflation
  • Nearly two-thirds (62%) of the public also believe that the “purpose of a house should be mainly a home,”as opposed to “mainly a financial investment” (1%)

In each case, there is popular support across all regions of Britain, and among voters of all the main political parties, indicating a strong appetite for a bold new approach to tackling the housing affordability crisis.

The report recommends that the UK government launches a new long-term housing affordability strategy to stabilise house prices and bring the house-price-to-income ratio down to more sustainable levels over time. A number of policies are proposed to implement this strategy, including:

  • Updating the Bank of England’s mandate to support sustainable house prices, enabling the Bank to make better use of existing and new policy tools to guide lending away from inflating house prices, as well as more coordination between monetary and fiscal policy to reduce reliance on a ‘trickle down’ wealth effect from monetary policies like quantitative easing
  • Fairer taxation of property for investment purposes – such as higher Capital Gains Tax on second homes, bringing tax on buy-to-let and investment properties in line with income tax rates, as well as higher taxes on overseas investors and companies
  • Improving alternatives to home ownership with rent controls, security of tenure for private sector tenants, while scaling up non-market alternatives to offer secure and affordable alternatives to home ownership

Co-author of the report, Positive Money senior economist Danisha Kazi, said:

“The prevalent narrative that house prices are out of reach for so many due to a shortage of homes fails to explain the explosive growth of recent decades. House price inflation has mainly been driven by successive governments and central bankers transforming homes into financial assets, through deregulation and other policies favouring investment in property.
“Governments have failed to deal with the housing crisis because of a pervasive view that the public, who are majority homeowners, would be against policies that restrict house price growth. However, the evidence suggests that most people, including homeowners, support a fairer approach to housing which seeks to stabilise prices rather than letting them inflate endlessly. 
“The government needs a bold new strategy to slowly let the air out of the housing bubble and tackle this huge part of the cost of living crisis. A new housing affordability strategy should include increasing taxes on multiple property owners while simultaneously improving alternatives to home ownership, as well as a new mandate for the Bank of England to ensure our central bank is no longer throwing fuel on the fire.”

From the original Positive Money blog here.

Read the report - Banking on Property

31 March 2022