After blue-sky thinking, a bit of red sky

Cameron Direct. What a deliciously apposite name for the Prime Minister’s roadshows, conjuring as it does images of cut-price insurance salesmen and ambulance-chasing “real” lawyers. Well, the “real” politician decided yesterday to divest himself of some blue-sky thinking on social housing. And the bluest and most skyward of this thinking was all about revoking the security of tenure (not for existing tenants, but for new tenants of new provision) that council and housing association tenants currently enjoy.

One of the most tedious aspects of political debate in this country is the immediate, knee-jerk, ideological response that political opponents are always dishing out to one another. So it wasn’t many minutes before the end of civilisation as we know it was being trumpeted from the bastions of the left, just as similar dire warnings about the end of civilisation as we then knew it were immediately given by the right when the minimum wage was introduced. Last time I checked, that didn’t seem to have happened, and I doubt it will if security of tenure were to be abandoned. Grant Shapps is right to point to the 1.8 million people in dire need of housing that are currently unable to get onto the social housing ladder, and unless we do something to loosen the relationships between tenants and their social housing home most of those 1.8 million will never step onto that first rung. It is breathtaking complacence for the left simply to say, “OK, just build 1.8 million new homes, and the problem’s sorted.” Even if that were a likely or possible solution, it is not going to deal with the problem in the lifetime of a good number of those 1.8 million on housing waiting lists, and in the meantime they are suffering appalling conditions, and we are damaging the life chances of countless thousands of our children. So I for one welcome the airing of this problem, even if I do not agree that ending security of tenure is necessarily the best or right solution.

Mr Cameron said he recognised that his idea was going to generate a “big argument”, and he’s not wrong there. But arguments are never universal, and what Cameron meant was that there’d be a big argument with Guardian readers, left-leaning liberals, and red-blooded socialists. That of course is the problem with big arguments set off by the Tories – they are always around ideas that seem to be derived from an analysis that locates social problems in the lives and communities of poorer, rather than richer, people.

But no problem. Mr Shapps told us on Radio 4’s Today programme this morning that his boss was only “opening up a debate”, and this wasn’t policy, at least not yet. So let me open up a different debate, this time one that’s going to cause a big argument, not with Guardian readers (although lots of them won’t like it either, since they’re nearly all middle-class, property-owning sorts with bigger consciences than are perhaps reflected in their generosity when it comes to wealth) but with Mail readers.

So, here goes. The biggest problem with housing in this country, apart from the hopeless imbalance between supply and demand, is that there are two pretty much hermetically sealed housing streams. In the private market we have, over the long term, ever-increasing inflation, and a bottom rung ever more inaccessible to new entrants. Those already in the market are insulated of course, because they can sell their properties for huge sums, and thus are able to afford the even huger sums required for their upgrade. This market is being disturbed by the massive difficulty in the first-time buyer segment, but this is being overcome by what is in effect a new class of hereditary wealth. Children of property-rich parents are being given a slice of their parents’ accumulated wealth to use as deposits, and so in a way first-time buyers are increasingly using recycled receipts from within the market. And then there is the social housing sector that Mr Cameron was waxing eloquent about yesterday. Mostly, right-to-buy apart, never will the twain of these housing streams meet.

So rather than look at the social housing stream, I’m going to look at the private stream. If we don’t do something, I can see no end to the long-term upward spiral of prices, never mind the short-term crises that assault the market from time to time. The underlying logic of supply and demand will have its way. OK. Take a deep breath. Daily Mail readers, prepare your shrillest hysteria. I propose that capital gains tax be imposed on all property, yes, including main or only residences. And I propose that it be fiercely tapered so that as capital gains escalate, the proportion taxed becomes steeply higher. It always used to be broadly accepted that unearned income be taxed more severely than earned income. And if buying a house at age 25 for £50,000, doing bugger all but routine maintenance, and then selling at age 45 for £500,000 isn’t unearned wealth, what the fuck is? A big tax bill at that point would surely concentrate minds. It would have a sharp downward pressure on prices since it would no longer be a simple case of buying an even more expensive house with a massive deposit “earned” from the inflation on the previous property. And it would be better to accept a lower price in order to avoid the steep taper that I’ve proposed.

Of course, I realise that this will be the end of civilisation as we know it. I’m sure that there would be consequences that I don’t intend, and haven’t thought of. But there would also be the consequences I do intend and have thought of. If we bring the two streams of housing closer together, then the Tories’ beloved mobility might just be possible as people move more easily from the social housing stream to the private stream. We will stop turbo-charging the private market that surely needs no such added inflation when the supply and demand position is already stoking it up quite enough.

But before apoplexy takes you over completely, don’t forget that I’m just opening up a debate. It just happens to be a debate that has consequences for rich people, rather than the usual Tory kind that only has consequences for the poor.

9 thoughts on “After blue-sky thinking, a bit of red sky

  1. A tax of this sort would certainly concentrate minds, although I can see how it may engender vigorous dispute! I live in an area where buy-to-let and rich parents investing in property for their student kids is legion, preventing others from genuine opportunities to establish themselves. Not that this property is cheap anyway…

    What I can report is that in Cameron’s constituency, there is active opposition to low-cost housing of any sort, whether social or private, purely from a NIMBY perspective. The monied Cotswold blue-rinse brigade is a staunch Conservative church, and there is no way that Cameron’s going to upset or alienate THEM.

    As a consequence, people starting out are unable to live where they grew up, or raise their families there. Sad, but true.

  2. “…a debate that has consequences for rich people, rather than the usual Tory kind that only has consequences for the poor.”

    Very well said.

    I live in the monied Cotswold blue-rinse area (Tetbury), where you could just about get a 1-bed flat for under £120k, a 2 bed-flat for £150k and an actual house for £180k.

    There are lots of worthy council discussions about ‘affordable housing’. But most of the jobs that would enable anyone to afford the mortgage on a £150k property are not based in Tetbury, so people have to commute to Swindon, Bristol, Bath etc. Public transport from Tetbury is poor, so to work there you need a car; which is also expensive. So people move away.

    My neighbour has lived in his house since the 1970s. He has raised 2 teenage boys who would like to move out, but cannot afford to. They have full-time jobs, but 19-year-old apprentice plumbers don’t earn heaps of money. He’s not rich – but he’s not poor either. Until recently he owned his £250k home outright. He has remortgaged his house to fund a deposit for them.

    I feel Cameron COULD upset his supporters here. Recent election data shows that even in the last decade, the Tory vote was incredibly consistent. They’d vote Tory almost regardless. Of course there are degrees to ‘upset’. Stealing their inheritances to help the oiks who overturned the Portaloos on the Playing Fields might not play too well…

  3. Leaving aside the immorality of using tax for social engineering, wouldn’t it just be better to allow more housing for rent to be built? Or is that just too much of a bloody obvious answer? Values are set (mostly) by supply – building more new housing would suppress future asset value spikes and would address the issue of less well-paid people in high value areas rather better than a tax would.

    • Social engineering? All I’m (somewhat playfully) suggesting is that tax is used to moderate a market that is not functioning efficiently. I suspect that “using tax for social engineering” is simply equivalent to “taxes that hit people I don’t want to see hit”.

      I think I have made it pretty clear that there is also a problem of supply, but what makes you think that this can be addressed by “allowing” more housing for rent to be built? What’s not allowing it at the moment? Simply lack of public investment along with the new “right” that the coalition has given to NIMBYists to oppose development that they fear might injure their asset values. One might almost call that social engineering!

      • I think the tax you’re looking for which would moderate this market that is not functioning efficiently is Land Value Tax (see Antonia Swinson: The Root of all Evil Chapter 5 for an excellent summary of how this would work). It has the advantage over CGT (which is a transaction tax and therefore only levied once) of being able to be phased in and charged on an annual basis.

  4. Yes, I think it would be a good idea to apply CGT to all property sales, to help reduce house prices. However, I can’t ever see it happening because it would upset the wealthy elites who control this country.

    Where I live (Norfolk), the average house price is about £200,000, but most people earn a salary somewhere within the range of £12,000 – £30,000. Therefore many people have no way of buying their own home, especially if they are single – by the time you pay the mortgage, there would be hardly any money left over to buy food!

    I think the government’s plans are unfair – it’s wrong to throw people out of their council houses and into insecure private rental properties. The proposals may actually discourage people from getting a job, if they think they are going to lose their home.

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