CLASS Ideas: Stopping Our Homes Becoming Their Investments
With the election now in full swing, CLASS has been thinking about alternative policies to the problems this country faces. The UK housing crisis is only getting worse, with affordable housing out of reach for a generation. By 2020, the average first time buyer will need to earn over £60k, more than twice the average wage, and if the minimum wage had risen in line with house prices, it’d be £14 in London and £10 in the rest of the UK. In London, where we see the worst effects of our broken property market, the only property you can buy for under £200,000 in some areas is a parking space.
Why are we in this situation? There have been multiple policy failures over the years, but one reason is that we allow our homes to be used as piggy banks for the world's super rich. The problem is as much to do with a lack of house building as it is to do with a flood of demand from the global elite.
In central London, almost half of new-build housing is snapped up by overseas investors, and that trickles down through the rest of the housing market, pushing up housing prices and rents for everyone. While rich overseas investors buy properties for investment purposes and leave them empty, homelessness has doubled since 2010, driven in part by unaffordable housing.
There’s also a darker side to the property market in the UK. Anti-corruption campaigners have long voiced concerns about where the money comes from, with evidence mounting that the global elite are using our property market to launder money and hide ill-gotten gains.
We think it’s time for an intervention, and propose limiting home ownership (with different requirements across the country) to UK residents. Only those that have been paying taxes in this country for more than two years, as well as legitimate charities and companies based in the UK, should be able to buy property.
How would it work?
It’s important to point out that although limiting home ownership may sound like a new idea in the UK, other countries already have rules in place. In Iceland and Liechtenstein only residents can buy property; in Austria overseas investors are unable to buy property in certain states, including the capital Vienna; and in Switzerland non-residents are unable to buy property in the two largest cities, Geneva and Zurich.
Applying rules on buying property in the UK would calm the bidding war for housing in hotspots like London and the South East, ease our chronic housing shortage and ultimately stop the global elite from wreaking havoc on our housing market.
It’s important to remember that this doesn’t just affect London, although our capital is feeling the worst effects of the housing crisis right now. New developments in Birmingham and Manchester are increasingly advertised as investments for elite buyers overseas, and if this continues unchecked we’ll see the dysfunctional property market spread all over the UK.
Limiting home ownership to UK tax payers during a housing crisis should be an obvious step, and everyone who wants the security of owning a home or affordable rent for themselves or their children would benefit. The UK shouldn’t be a playground for the super rich and houses are meant to be lived in: it’s time for our political parties to take action.