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Saturday, June 15, 2019

The huge disparity afflicting the housing market

Today's Guardian tells us about a new report which claims that property wealth in Britain from second homes has risen by more than 50% over the past two decades to reach nearly £1 trillion.

Research by the Resolution Foundation has found that total property wealth for UK residents from second homes, buy-to-let investments and overseas property has risen in value from around £610bn in 2001 to £941bn. The number of British adults in families who have wealth from properties additional to their own home has risen by more than 50% this century to reach 5.5 million – around one in 10 of the UK population.

At the same time, we are witnessing falling levels of home ownership for the UK population, so that of the estimated 23.2m households in England, 14.8m or 64% are owner-occupiers, down from a peak of 71% in 2003.

Almost 2 million people own rental properties, up from about 1.2 million in 2008, while the total number of buy-to-let mortgages has risen by about 15 times since the turn of the millennium:

A lack of new council homes being built to replace those sold under Margaret Thatcher’s right to buy policy has contributed to an imbalanced housing market, with a dearth of affordable homes, while increasing numbers live in private-rented accommodation.

There are also concerns over the divisions of wealth in modern Britain. House prices have boomed over the past decade since the financial crisis, while wage growth has stalled.

Wealth inequality is much greater than the differences in pay between workers, with the wealth of the top 10% richest households worth about five times more than that of the bottom half of all families combined. Illustrating the scale of the rising wealth tied up in second homes, the Resolution Foundation said additional properties accounted for about 15.8% of the £6tn in gross property wealth in Britain, up from 13.7% in 2006-08.

The research, funded by the Nuffield Foundation, found that older generations in particular had benefited from the rise in property values, as property wealth typically takes years to accumulate. Around one in six people born in the 1950s report additional property wealth, the highest of any cohort.

The rise in buy-to-let home ownership has led to the increasing transfer of wealth across the generational divide, as younger private renters line the pockets of older landlords. The research showed that the baby boomer generation born around the time of the second world war received more than half of all rental income in Britain.

Trends like these are difficult to turn around easily, but with an increasing number of young families not being able to afford to get onto the property ladder at all, there is clearly a need for some sort of intervention by government.

Certainly, we need to build more social, affordable and intermediate homes to rent and buy, but we should also look at schemes such as Rent to own, being promoted by the Welsh Government at the instigation of the Liberal Democrats.

Above all this trend underlines the argument for us to be taxing wealth more effectively, so as to be better able to pay for the sort of schemes I have outlined in the previous paragraph.
- and not all councils tax second homes to the limits allowed.

There is a major weakness with that measure, Frank, as some second home owners are reclassifying their properties as businesses so as to avoid the extra tax. This is a loophole the Welsh Government needs to close along with specifying that all student accommodation is also a business premises and as such should pay business rates. None of those 17 story towers of student flats going up in Swansea and Cardiff will pay a penny in council tax or business rates.
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