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You have led very sheltered lives if you do not know, or have not heard of anyone who claims benefits and also works for cash in hand. There was a BBC undercover programme some years ago about a clothing manufacturer somewhere around Mile End and the superviser used to allow the machinists time off to go and sign on!- Suited him because he could pay low wages

uncleglen Wrote:

-------------------------------------------------------

> You have led very sheltered lives if you do not

> know, or have not heard of anyone who claims

> benefits and also works for cash in hand. There

> was a BBC undercover programme some years ago

> about a clothing manufacturer somewhere around

> Mile End and the superviser used to allow the

> machinists time off to go and sign on!- Suited him

> because he could pay low wages


Be that as it may, it doesn't at all answer the question I posed previously. Which is...


"So the idea is that moving them [unemployed people] out of London will free up housing stock? But is there any evidence that freeing up housing stock [in this way] would make it any easier for new graduates and first-time buyers to buy a house? (If indeed buying a house is an admirable goal for any number of reasons mentioned above...)"


You see, with renters unable to save enough money for deposits, even if housing stock becomes available, what's to stop wealthy buyers from purchasing multiple homes then letting them out again? Cycle repeats.


I think Huguenot had some very interesting suggestions. So then, the question is, What's holding London back from making these changes?


(You can hardly claim that the unemployed on benefits are holding us back from making tax changes for owners of multiple dwellings!?!)

I agree that H has the made the most interesting points on this thread. Unemployed aside, there are almost a million people in full time work that can't pay all of their rents and yesterday a news report claimed that most of those working and renting in London were spending at least half of their income on rent.


Yes the market is reflecting a supply and demand but moving the poorest out isn't going to change anything for the better.

The problem with some of H's ideas is that they would spell the end of the rental market. House prices would be lower, no doubt but renting would be impossible unless it was carried out by the government. I'm not sure that a city as dynamic as London really could manage without rental housing.

I occasionally agree with Hugo and am pleased to say I like his ideas for tackling our housing issues.


Being the rabid pinko that I am, however, I'd want to treble the speed of introduction and tax second/third etc homes under a land tax regime at full cost (not just for properties over ?2 million).


I know a young person who was homeless at 16 and after two years in a hostel, was given a 1 bedroom council flat in Peckham. She managed to get a job in Pret a Manger soon after and was happy to be supporting herself. Four years later, she has had to give up her flat, because despite working full time, the rent on her council flat took over half of her net pay every week and being under 25 she was not entitled to any additional help. Subsequently she got into rent arrears and she got into debt on all of her bills.


The situation re housing and benefits is immoral and stupid people like uncleglen who want to blame people who can't get themsleves out of the mire because the odds are so stacked against them need to hope they don't end up in a situation of need and find the saftey nets have had massive bloody holes blasted all over them.

LondonMix Wrote:

-------------------------------------------------------

> The problem with some of H's ideas is that they

> would spell the end of the rental market. House

> prices would be lower, no doubt but renting would

> be impossible unless it was carried out by the

> government. I'm not sure that a city as dynamic

> as London really could manage without rental

> housing.



Not sure I follow you. Can you elaborate on how the rental market would be killed by this?

Well, there were two ideas H put forward. If interest stops being deductible as a business expense, only a landlord who owns his or her property with close 100% equity would be able to rent property without making a significant loss. For most buy to let properties, the rent just about covers the interest, management fees and maintenance costs. If you had to pay tax on the rent without being able to deduct the interest you as a landlord would be making a significant loss every year.


This change would result in house prices falling as landlords with debt sold to owner occupiers. No new landlords would want to buy the homes unless they had the capital to buy with close to 100% equity (substantially reducing the number of landlords in the market). If you also limited the number of homes a single landlord could own, this would also reduce the number of rental properties. The balance between properties owned by their residents and properties available for rent would be skewed very dramatically. House prices would fall, which is good, but rents would probably increase due to the reduced supply of properties available for rent.


This would make London for too inflexible. A city like London needs a lot of rental properties so that the young, talented and creative young people can come and give it a go.


Edited to Add: House prices going down would allow more people who are renting to buy reducing demand for rental properties but renting is also about a stage of life and the reduced cost of housing wouldn't totally reduce rental demand if you see what I mean.

I don't think anyone wants to see a collapse! The truth is we want housing to be cheaper for both renters and people who want to buy and that's tough.


Empty homes should be addressed (taxes on vacant homes in the private sector, the state better using social housing etc). More building to help meet demand and making other parts of the UK more attractive to divert demand away from the capital. The truth is London is amazing and people are willing to pay whatever they can to stay here. The danger off course is the London just becomes a rich ghetto which would be terrible. I value diversity in London so want to make sure a certain amount of social housing is always part of the housing stock. Key workers also need to be accomodated. Beyond that though, I have no answers or solutions. It's an extremely difficult issue.

There is a big difference between people who are 'in the mire' and can't get out- and those that choose to live off benefits and in the black economy. (There is even someone proffering cash in hand work on the general forum today)

The government are well aware that there is wholesale fraud going on of the benefits system and they may be using a sledgehammer to crack a nut and people will suffer but otherwise there would be a free for all.

uncleglen Wrote:

-------------------------------------------------------

> There is a big difference between people who are

> 'in the mire' and can't get out- and those that

> choose to live off benefits and in the black

> economy. (There is even someone proffering cash in

> hand work on the general forum today)

> The government are well aware that there is

> wholesale fraud going on of the benefits system

> and they may be using a sledgehammer to crack a

> nut and people will suffer but otherwise there

> would be a free for all.


I still don't follow how that's connected to rental prices.


So you think government corruption is holding back intervention in the housing market?

Huguenot Wrote:

-------------------------------------------------------

> Houses are for living in.

> This is not shoes or toasters.


Hilarious and true!



Non residential ownership, and ownership of multiple dwelling come up repeatedly as issues, and yet nothing ever seems to be done to address these. As LM says, it's a difficult issue. And a complicated one too. Sometimes I wonder if the complex nature of this issue is what prevents it being tackled proactively. Perhaps small changes over time would be better than any wholesale intervention?

In 2001 BTL mortgages were only 1% of the market, by 2007 they were 10%.


You can't take 10% of housing stock and transfer it to existing home owners (effectively taking it off the market) without blowing the whole market dynamic.


It results in a corruption of the entire supply and demand equation that results in rocketing prices and the exclusion of first time buyers who are dumped on the rental market.


For me there is NO other significant issue.


More importantly this isn't a long term intractable issue - it was created in the last decade and it can be solved just as quickly.

Spot on H


Also worth pointing out that saying London requires a big and flexible rental market is all well and good, until the rents may as well be mortgages because they too are beyond the means of people wanting to give London a go


There will be pain - but do we wait for the bubble to pop and deal with the fallout (a la 2008) or do we try and pro-actively manage it?

The private rental market only represents 20% of the total London housing market. About 27% is social housing and the balance of 53% is owner occupied. There are 75,000 empty homes in London which represents 2.3% of the housing stock (the Mayor's office goal is to get this below 1%). Private rental figures are much higher in prime central London than in London in general (close to 40% in prime areas).


Nationally buy to let mortgages account for 13% of all outstanding mortgages (though there are landlords who don't have any debt). If you try to get rid of buy to let landlords in London and also restrict how many properties a single landlord can own, the result will be too small a private rental market for a dynamic city like London.


There are clearly forced renters so the balance between owner-occupiers and renters could be better but what you suggest seems far too dramatic. On a national level, the balance of owner occupiers vs. private renters vs. social renters hasn't changed that dramatically over the last 10 years so I am not sure that buy-to-let has had the impact you suggest. In 1999, in England 69.9% of households were owner-occupied, 20.2% was socially rented, and 9.9% was privately rented. In 2009, the statics for England were 67.9% owner-occupied, 17.8% social housing, and 14.2% for private housing. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/6695/1750765.pdf


How much rental property does London need? It's a very young, international city. I'd be concerned about anything that would change the availability of rental properties dramatically.

Yes, it does. Though it's easier to come to make a go of it renting (even if its expensive) than if the barrier to entry into London is buying a home.


The uncomfortable fact is that London is amazing and lots of people want to live here. Those with the most money (or those willing to sacrifice more of their disposable income) buy a place in either the rental market or the housing market at the expense of those who can't. It's unfair that those who make the most are the ones who get to enjoy the city. To prevent London becoming a rich ghetto, that's why social housing has to be part of the general plan (even though allocating a portion of London's limited housing stock to social housing actually pushes up private rents and house prices). Key workers also need to have a place. We can try to carve out space for other groups we think are essential for the growth and dynamism of the city but every home we allocate to such purposes will have long waiting lists and will actually drive up private rents and house prices as it will reduce supply of both.



Like I said, it's not easy and I don't have any easy solutions. My family and I give up a huge amount of quality of life to remain in London but for us, like many people, its totally worth it and that's the crux of the problem.

Couple of thoughts


yes, remove tax deductibility of interest across the board not just for property. Skews capital structure decision towards debt away from equity. While we're at it, property gains should be taxable on realisation: if people are going to treat property like an investment asset then it should be taxed like one.


Much of London's demand for property is from overseas investors looking for somewhere to park capital. The London property market in particular ticks a lot of boxes vs other international asset classes:

* stable and attractive legal regime

* benign tax environment (no capital gains tax for non-resident landlords)

* history of controls on new builds leading to structurally high and rising property prices

* and on top of all this, a nice place to live - not too hot, not too cold, good liberal cosmopolitan society with lots of like-minded people. Not perfect, but not bad


So UK buyers accounted for only 58% of all London transactions in 2012 (only 27% for new builds).


http://www.knightfrank.co.uk/news/70-per-cent-of-london-offices-sold-in-2012-went-to-foreign-buyers-01595.aspx


Yes, I'm sure they're focused on the top end but it filters all the way down the property chain. Belgravia to Kensington to Notting Hill to Fulham to Clapham to East Dulwich.


Problem is that I don't think we want to change much about what attracts people to London except perhaps relaxing planning and the tax regime.


So other than changing these factors, we are into market intervention with Londonmix and Huguenot's ideas being examples.

mikeb Wrote:

-------------------------------------------------------

> Couple of thoughts

>

> yes, remove tax deductibility of interest across the board not just for property.

> Skews capital structure decision towards debt away from equity.


That would make it near as impossible to start most businesses.


> While we're at it, property gains should be taxable on realisation: if people are going to

> treat property like an investment asset then it should be taxed like one.


Do you mean ALL property? Because BTL/investment properties already are. If you mean even primary homes, then that would make moving rather difficult and therefore severely reduce mobility.

I don't think removing the tax shield on interest would make it difficult to start businesses. I'd be quite happy to see the change as revenue neutral with cuts in corporation tax (actually more likely to get dividends tax deductible with higher corporation tax but that's another story). We need less debt in the economy - why are we subsidising it?


And no, CGT on house price gains would not make it more difficult to move house

* it's on gains not the value. Actually, I think it makes more sense than stamp duty, certainly at the higher levels

* happy to see RPI indexation as you get for business and used to get for personal tax

* the whole point is to reduce house price inflation / volatility


Just think: if houses are a necessity, then why do you care about CGT on gains? And if they're an investment then why do we subsidise them?

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