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A new report by the Joseph Rowntree Foundation, ‘Tackling housing market volatility in the UK’, makes a powerful case for a sustainable housing market, says Lord Best.
Booms are usually followed by busts, and both disrupt lives. While many of us may have felt smug in the 1990s and 2000s about the rapid rise in the value of our homes, we could also see that the boom was placing huge strains on the next generation. Now we are fearful the bubble may burst: if levels of unemployment and interest rates both go up, prices could tumble. And then house-builders will build even fewer new homes than now, exacerbating acute shortages.
The UK must create greater stability in the housing market, and a new report from the Joseph Rowntree Foundation (JRF) published on May 17 – Tackling housing market volatility in the UK – provides ideas on how to achieve this. Coming from a JRF Task Force that includes the economist Kate Barker (whose own reports have highlighted the huge gap between supply and demand), the report includes proposals for a new safety net for home-owners to replace the mis-sold and inadequate mortgage payment protection insurance policies that only cover a fifth of borrowers. This would offer more protection for the 100 families whose homes have been repossessed every day in 2011. The new scheme – alongside sensitive lending, and good advice for borrowers – would prevent mortgage arrears leading to repossessions, homelessness and a slump in property prices. It would be funded in three parts: half to a third by the home-owner, a quarter by the lender, and a quarter by government.
This high-level task force also considers the rental sectors, arguing that increasing security in the private rented sector is likely to be counterproductive – possibly causing landlords to sell up. This underlines the importance of having security of tenure in the social rented sector. The report advocates charging council tax in line with house prices, both to make the system fairer – London only pays 0.36 per cent of its house prices in council tax whilst the North East pays 0.65 per cent – and to address the fact that whilst prices have increased 250 per cent between 1994-2008, council tax only increased 165 per cent.
With its extensive database of housing statistics alongside its detailed analysis of the issues, the report makes a powerful case for replacing dangerous volatility with a socially sustainable housing market. Read the report here.
Richard Best was chief executive of the Joseph Rowntree Foundation from 1988 until 2006. He was raised to the peerage as Baron Best, of Godmanstone in the County of Dorset in 2001 and is currently president of the Local Government Association.
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