Tackling London's housing crisis | FT World

London is experiencing the biggest housing crisis since the Victorian era. The FT's Kate Allen explores how foreign investment and the city's growing population have contributed to the crisis, and how mayor Boris Johnson has tried to tackle it.

[emmaschul]

How do we go about fixing (or at least improving) the housing crisis?
I don’t think I’ve heard any dissenting voices to the opinion that the housing crisis that we’re in is being caused by the imbalance of supply and demand.
We’re not building enough homes and our population is growing.
It doesn’t take a Nobel winning economist to work out what that will lead to.

Since the 1980’s - we have seen an increasing consolidation amongst house builders. This means that small and medium sized builders and developers now build approximately 60-70% fewer homes than they used to and it means that 70% of our homes are delivered by about 10 different house builders.

Why is this important?

Well, consolidation reduces diversity and choice, and increases the power of the oligopoly.
This means that the big 10 can build what they like, when they like and that isn’t good for supply. Is it that surprising then that a recent RIBA report suggested that 75% of us would never buy a new-build home.

How can we improve both the quantity AND quality of the new homes being built?
Here are 5 actionable suggestions for Mr. Sharma, our new housing minister:
1. Create a farmer’s market of housing, where large sites are broken into smaller ones, where small and medium sized developers and builders can make a difference.
Exactly the same phenomenon has taken place in the supermarket industry. We have seen a consolidation of grocery shops so that the vast majority of our food purchases are through the big supermarket chains. We used to spend about 2 hours cooking every day and we now spend about 27 minutes. This is mainly due to the rise of the ‘ready-meal’ - which are tasty and convenient, but have too much salt and too much sugar in them and our nation is getting more obese as a result. The rise of the farmer’s market increases diversity and encourages that back to basic cooking from ingredients.

2. Disincentivise land trading by killing the planning arbitrage market.
It makes no sense that planning generally now costs tens of thousands of pounds and takes over a year on average to be successful.

3. Scrap stamp duty!
I know that this is not really your bag, but please have a word with Mr. Hammond. Stamp duty is a (potentially) huge tax on transactions which discourages people to move out of their homes.
If we want the elderly to move out of their large homes and downsize into new homes freeing up space for the younger, we need to make the transaction as cheap as possible for them.
If we want families living near good schools to move on when their kids leave the school, we need to make that easy for them and cheap for them to do so.

4. Introduce a capital gains tax on all home profit sales over a certain level.
Fourth (again, a word to Philip), to offset the lack of tax take from stamp duty and to discourage flipping of homes and the holding of homes as investment assets, we should introduce capital gains tax on all home profit sales over a certain level.

5. Improve affordable housing.
At the moment, policy dictates that developers should provide around 50% of new housing as affordable (borough/council dependent). In reality this never happens because of ‘viability assessments’.
Additionally, once a developer has agreed to provide the affordable homes, they are strongly incentivised to make these as low quality and as cheap as possible.
Instead, councils should build their own affordable housing - they know that building higher quality will pay dividends over the long-term as maintenance and refurbishment (whole life-cycle costs) are reduced, so they should do so, just like they used to.

[nthperson]

What have been pushed upward is not the cost of housing. It costs about the same almost everywhere to construct a housing unit. What is increasing is the cost of land acquisition. The reason land prices climb as they do is the low effective rate of taxation on the potential annual rental value of land. The economics are straightforward. Every parcel or tract of land has some potential annual revenue value based on locational advantages. This value is societally-created by the aggregate public and private investment in infrastructure and other amenties. Failure of the public sector to collect these values via taxation leaves to owners of land a net imputed income stream, which is capitalized by market forces into higher and higher land prices. The supply of land may actually fall as owners of land hoard land in the expectation of even higher gains. Other "investors" acquire land for purely speculative reasons, which serves to push up the price of land that owners are willing to sell. Construction of housing affordable to most working individuals and households thus becomes impossible without huge government subsidies or the allocation of publicly-held land to housing.

[tomblewomble]

until btl landlords are disincentivised by heavier taxation and foreign investors are banned from purchasing residential property building additional affordable house will just be adding fuel to the fire.