The Year of The Striver?

This morning's Daily Telegraph reports an excellent initiative by Michael Gove, Tory housing spokesman, that might increase the opportunities for young people to get on the housing ladder.  Mr Gove, noting that first-time buyers cannot afford to buy an average property in 93% of British towns, is suggesting encouraging a form of home ownership where young buyers would own the 'bricks and mortar' but the land would be owned by a community trust that could protect the housing stock for local people.

David Cameron has championed the young housebuyer since the beginning of his leadership but there are signs that he is also thinking more broadly of 'striver voters'.  Strivers are described in ConservativeHome's dictionary:

"When public policy goes wrong hard-working families suffer most. They are hit hardest by stealth taxes, the marriage penalty, interest rate rises and long hospital waiting lists. Gordon Brown’s means-testing maze is making a mockery of their efforts to save for their retirement."

Australia's Prime Minister John Howard has made what he calls 'battlers' a core part of his electoral coalition.  Strong policies on housing access, skills (as reported in today's FT), community safety, relief from taxation and faster access to public services will all be essential components of a Tory strategy to reach out to those aspirational voters that were so important to Mrs Thatcher's electoral success.  Mr Cameron made substantial progress in 2006 in terms of winning support from higher income and professional voters.  The challenge for 2007 is to win support among lower income voters and David Cameron's new year message suggested that he understands that.  He talked about the party becoming the champion "of working people" and he has put David Davis in charge of a commission on social mobility.

In an article for The Sunday Times, Mr Davis identified four key routes to wealth and wider success:

• Education and training;
• Working for a large firm;
• Starting your own business;
• The property ladder.

It must be hoped that the Tory leadership studies today's article by Sir Eric Anderson in The Daily Telegraph.  Sir Eric makes it clear that selective education benefits poorer pupils most.  Is it too late for the Tories to embrace this important conclusion?  Failure to do so will leave a big hole in any renewed Tory interest in the aspirational voter. 

Comments

[Matthew Dear]

I love the idea of Trust ownership of the land - it's certainly not ideal to split it from the edifice built on it, but this is a much better solution than current shared ownership schemes in which the equity is shared proportionately and rent is paid on the proportion not owned. I have a friend (teacher) who has bought under this type of arrangement and the rent they pay to Kent County Council is crippling them.

[Denis Cooper]

" ... protect the housing stock for local people."

I suspect that may already be an illegal form of discrimination under British law, and if not the EU will make sure that it is made illegal.

[Kit]

Michael Gove's idea is plain wrong. The solution is simple - BUILD MORE HOMES. Sorry to shout but what can you do when all the leading political parties do not understand the simple concept of supply and demand. The Conservatives mantra should be "build more homes" not tweak failed Labour ideas.
Cut the red-tape and let the market supply the demand.
p.s. please don't force builders to build 2 bed or studio flats - let them build real homes.

[HF]

The main problem for starters are too many immigrants.

They push up the prices of starter level homes and rents and also drive down wages.

To illustrate, each year 1m young people enter the world of work. Immigrants add another 0.5m a year. So there are now 3 people chasing what 2 people used to.

[Angelo Basu]

The Australians don't only try to promote the interests of "battlers" they also vilify "bludgers". Legal economic migrants who come here with the intention of working and bettering their position however they can should be seen as new battlers, with illegal migrants and those coming with the intention of living off benefits being bludgers in the same way as those indigenous people who aren't battling but bludging off the State.

The article doesn't say anything about the economics of how the community trusts would run- where would they get funding from and on what basis (presumably by "not for profit" it is meant that they would not be avoiding profit but rather that they would take profits and reinvest them in further land acquisition- but to start they would need financial guarantees to make them worth lending to and these would be likely to have to come from the State in many cases). In what way would the proposal differ from the existing concept of leaseholds with the freehold being owned by someone other than the tenant? To preserve the value of the Trust's land ownership there would need to be restrictions on the extent to which the "homeowner" was entitled to act as if they genuinely owned the bricks and mortar.

[renny]

Why the obsession with home ownership?

What goes up will eventually come down - lets leave the housing market alone.

[Andrew Woodman]

Where's the land coming from to build all these houses Kit? In my constituncy, the Governement are demanding 20000 new homes to be built in the next 20 years. That's acres of green belt land. What happens after they're built? We'll need more and more if we follow the same pattern as building roads creates more traffic. The idea of just building more and more houses is far too simplistic.

[Rachel Joyce]

The reason we need more houses is because of
1. increased population - mainly as a result of immigration (usually young fit people many of whom will return to Poland etc, some who may stay and have children) and:
2. increased divorce, separation and people living longer (often widows or widowers) - all small households, usually one person.
Demographics show that the increased need for housing is therefore mainly for one person or no more than 2 person households.
Our population is also predicted to decline, as is the rest of the EU in the next 50 years.
Therefore there is no need to rape the countryside to provide for these short term housing needs - brown field developments and turning houses into flats and maisonettes need to be encouraged by tax policy - perhaps no stamp duty to be paid for new houses built on brown field sites, or houses split up into flats.
Enough of the English Countryside has been destroyed - there is no need to destroy more when there is a green and sensible alternative.

[Kit]

Rachel and Andrew, you cannot close your eyes to this problem. People need homes. It is that simple. Areas of natural beauty should be protected but most bland farmland would be improved by building attractive new villages and small towns. Even Prince Charles likes this idea. The current policy of urban sprawl and increasing housing density does not benefit anyone. The Adam Smith Institutes proposals are worth a read if the Tories want a genuinely sensible policy.

[Denis Cooper]

It isn't correct to say that the UK population is predicted to decline, because it's predicted that there'll be a continuation of mass immigration, and consequently the official prediction is that the population will rise to 71 million by 2074, from the present level which is something over 60.5 million (as far as is known).

http://www.optimumpopulation.org/opt.toomany.uk.html

We've actually been building more than enough new homes for the established population and their descendants; the excess of demand over supply is entirely attributable to the effects of mass immigration, and therefore the price bubble is also in large measure being inflated by mass immigration. But we can't stop now, or the bubble will burst; we have to carry on until all of the world's 6,633,965,742 people are living here. Sorry, I meant 6,633,966,654. No, 6,633,966,944 ...

[Praguetory]

Land value tax is the best market solution.

[Praguetory]

And of course managed immigration.

[Downsize the NHS]

Hi

Totally pathetic are Kit's plans for building over the countryside.

Where do you stop? When Britain's like a sardine can?

Why does he say build houses not 1 bed flats? How will the homeless live in houses unless subsidined by the stste ie us.

Time to reduce the population by a programme of planned parenthood.

[Denis Cooper]

Equally, Kit, you cannot close your eyes to this problem. People do have homes, in their own countries, but if they come here then they will need homes here.

[Denis Cooper]

Downsize the NHS, if you mean reducing birth rates I agree. But not here; we're just about at, or a little below, the replacement rate. The problem with excessive birth rates is in other countries, and if we cut the birth rate here any further the government would simply import more of those surplus people from abroad.

[TaxCutter]

Given this idea how come Robert Owen got missed off Willets list of, ahem, conservatives?

[Kit]

Denis and Downsize, our housing problems are only partly caused by immigration. The restrictive planning laws are the main problem. Praugetory is right Land Value Tax is a good solution when combined with simpler planning laws.
To solve the immigration problem you would need to leave the EU...

[Downsize the NHS]

Hi

There's no problem then.

We need to leave the EU anyway.

[Andy Stidwill]

The main problem is that young adults are being forced to live at home with their parents because of the 93% figure.

The effect of this is to make young people less independent than in the past, which I think is definitely a bad thing.

[Tory Solicitor]

My 2p

1. I think we need to get away from the idea that anyone has a divine right to own a home. They do not. This is especially the case given that so many more people now live alone for long parts of their lives.

2. A related idea is that of subsidising the property purchases of key workers. I think this is wrong-headed. If you think key workers are paid too little, make the case. If the case is strong, we should advocate increased pay for key workers (whoever they may be)rather than costly and complicated subsidy schemes.

3. Surely the best way to help "strivers" (I think I bracket myself in this category)is to increase the personal allowance (how about no income tax for sums earnt under £8,000?). This could be accounted for with an increase in VAT so as to chime with the 'sound money' theme (at least in the short term)

[Andy Stidwill]

I'd love to know whether all these people who keep saying other people don't have a right to own a home actually own one themselves.

[Denis Cooper]

No, Kit, mass immigration is the principle cause of the shortage in housing and therefore a major cause of house price inflation. I repeat that for years now we've been building more than enough new homes to meet the needs of the established population and their offspring, despite planning delays and all the other obstacles, but we haven't been building enough extra homes to cope with the effects of the mass immigration which has been taking place.

[Tory Solicitor]

given the further enlargement of the EU yesterday, it might be time to start arguing for derogation by member states on free movement of workers.

[Mark Wadsworth]

Well, what a lovely set of ideas!

To summarise - let's leave the EU, reduce mass immigration, double the tax-free personal allowance, build a few more homes and introduce land value tax to ensure more efficient use of what housing stock we've got (if people live at home for longer that's a good thing, actually). The CLT is superficially attractive but unworkable in practice. If we had fewer "key workers" then we could pay the really necessary ones a bit more in salary, so no need for Key Worker shared ownership nonsense. And the housing bubble is going to burst.

I second all of those thoughts - I hope I didn't miss anybody out! BTW the quid pro quo of Land Value Tax (aka Location benefit levy) has to be getting rid of Council Tax, Stamp Duty Land Tax and Inheritance tax, obviously.

[Graeme Archer]

I haven't seen any evidence to support this claim that it is immigration which is causing the housing shortage in the UK. It doesn't fit with the anecdotal experience - yes perhaps .5 - 1 million young Polish people came here last year, but they weren't buying starter flats from Barratt homes in suburban Essex (not yet, though I hope a lot of them do) - most are living in multiple occupancy housing which would not be acceptable to us. I know in the hotel industry, which employs a lot of young Poles on minimum wage, households containing dozens of young people, in zones 5-6, are not uncommon. It is clearly impossible to live in London otherwise anyway (it would not be possible to buy a house on minimum wage with no access to UK social security, as of course the young Polish people are disbarred).

So I don't understand how this can be the driver for the fact that house prices are now several multiples beyond the reach of people on low-to-average incomes.

I think Kit might be onto something though I don't agree with the forceful "just build more houses and shut up!" approach! But we should look again at planning processes. When I was a councillor the whole thing struck me as ludicrous. We would spend hours discussing the type of glass we would permit a houseowner to put in their bathroom window, but were told by Mr Legal Advisor that we could have no say over the sales of entire fields of farmland into (low priced and much needed) housing.

It's one of those "long tail distribution" things again isn't it? Housing as an issue won't be solved by a Tory policy, it will be helped by a range of Tory policies. Michael Gove's idea, lucidly explained by him on the World At One, is a sensible idea to extend the amount of leasehold property we have. Another idea is raised by TomTom - we do, I believe, have quite short term mortgages by international standards, so perhaps there's something we could do to encourage lenders to offer longer term deals. Reform of planning I've mentioned. And finally - very high priority for the eventual Tory candidate for London - we should focus on those things which drive middle class people from inner cities in the first place, ie ensure crime control and high educational standards (obvious) and (more localist agenda) work to empower the real people who turn postcodes from no-go areas into des-res addresses (look at the Broadway Market Traders Association who have turned E8 from a pit into probably the most sought-after postcode of these parts, of course I'm on the wrong side of Mare Street to benefit, 'twas ever thus).

PS "Key Workers" as it stands is an arrogant nonsense. Of course teachers and nurses are key workers but so are shopkeepers and cleaners. The idea that by dint of working in the public sector you deserve access to a shared ownership scheme, but if you're on a minimum wage in the private sector then you can just f*ck off, sickens me. We should reform this too. For example I think that police officers are disbarred! I can't think of a more important public sector key worker I would like to have living locally!

[Mark Wadsworth]

Graeme, I instincively dislike the way some people blame house price rises on immigration but it would appear to be true, there is plenty of simple economic logic and anecdotal evidence to suggest that it is quite simply true. Of course, we can argue about the degree, is mass immigration to claim for one-tenth of price rises of recent years, or one-half and so on.

Anyway, what about my local Mr Minit, is he a key worker?

[George Hinton]

To resolve the housing crisis you need to build more homes. To resolve the lack of affordable housing you need to create more social housing, the council homes that were sold off in the thousands under Maggie's right to buy, which means giving more funds to local authorities, not trusts.
As for the rest, let's just look at the proposal that HQ impose quota's, impose candidates and engage in positive discrimination. Where's the fairness and how does that motivate a striver?
Meritocracy, meritocracy, meritocracy.
There must be a level playing field of aspiration, brains and ability must be rewarded, aspirations must be funnelled and over-expectation given cold reality.
Comprehensives have resulted in many being under-educated and too many have gone on to do half-assed courses at third rate poly's and have ended up feeling hard done by when they cannot get a good job in the cold commercial world.
Further education is not a universal right, only those with proven ability should have that right. We need an educated intelligent elite to maintain our competitve edge on the worlds stage. Afterall you don't see the French ruining the standards at ENA, just so that all can attend, why do so at OxBridge.
To attract the working class we need to recognise that they exist, that they have rights and aspirations and we must allow these to permeate and be fulfilled if at all possible. We need to recognise that grammar schools benefited working class kids. We need to pour scorn on the dogma of the left that everyone should be brought to the same dismal standard.

[Angelo Basu]

There already is a derogation from the TEU right of freedom of movement for workers in respect of the 12 newest EU Member States. It is just that the UK (along with only Ireland and Sweden) decided not to exercise the derogation for the first 10 and has exercised it in a limited way (by putting on a quota) for the newest 2. Mass immigration from the EU15 wasn't really a significant issue (although perhaps the locals in the agricultural towns around the Wash would disagree as they did get a number of Portugese migrant workers).

Are many of the new immigrants buying houses? As most seem to have come to fill low paid jobs and are sending money back home I'd have thought they would have had most impact on the rental market. Or has this had an indirect impact on house prices because of landlords investing more in rental property due to increased demand? But has this actually had greater impact than eg the massive increase in student numbers creating a much larger rental market in university towns? The massive bonuses being paid in the City of London are also in my opinion likely to lead to house price inflation in the South East, both as the hard working recipients of those bonuses trade up the ladder themselves but also as they invest surpluses in buy to let property. If property prices (rental and ownership) rise too far this will itself put a brake on economic immigration as it will not longer be economically viable for migrants to come here to work as the cost of living would be too high to improve their position compared to their home countries.

It sits oddly with us as the Party that created the home owning democracy to argue that home ownership should be a privilege rather than a right!

[esbonio]

As I understand the concept, a land value tax is a stupid idea with as much electoral traction as the poll tax.

It strikes me as quite simple. If we have a housing shortage we can increase supply or (more difficult) reduce demand. The increased demand for housing is attributable to a rising population (itself presumably attributable to an ageing poplulation and net inward immigration) combined with changed patterns of living (more single households).

If we wish to increase the supply of housing we must make more land available and the way to do that is to ease (not abolish) planning restrictions. The idea that we should instead tax people punitively from their homes for merely holding assets is distinctively illiberal. We have had enough of that treatment from a Labour chancellor.

[Andrew Woodman]

As we're throwing in all factors, am I alone in thinking that these house price rises stemed from banks changing the rules on 3 times the salary as a limit for a mortgage, and people falling out of love with the stock market for their investments and pensions (in no small way attributable to the Gordon Brown pension raid).

As stability is the keyword, I don't see what we can do to reverse this. Just something else to ponder.

[Graeme Archer]

A propos the points about immigration and house prices -- I don't understand how people who are renting accommodation that would probably otherwise house a tenth of the headcount, if any, could be having an effect on house prices. But the Guardian had an article last November which set out one rationale:

http://business.guardian.co.uk/story/0,,1954448,00.html

Here's the relevant bit:
This is not to say that Polish people have been turning up and buying houses, but they do affect housing demand by renting property. That has pushed up rents and rental yields and maintained the attraction of buy-to-let well beyond its sell-by date.

If the impact of Polish workers has been to have kept the buy-to-let market attractive (the article provides no evidence for this, by the way), then it remains unlikely to me that it is a key driver for the current difficulty that low-to-average earners have of getting onto the property ladder. I think the other subjects discussed on this thread are more likely to be "real".

[Graeme Archer]

I also don't understand why the Guardian writer finds buy-to-let a bad idea, if there is a market there demanding access to it? I thought one of the traditional problems for the UK Housing market has been the lack of privately owned rental properties?

[Mark Wadsworth]

Esbonio "The idea that we should instead tax people punitively from their homes for merely holding assets is distinctively illiberal".

Hang about here. If you own shares or have money in the bank, either the company is paying corporation tax or you are paying income tax. If you own paintings or valuable antiques then it is nobody's business and this should of course not be taxed (i.e. scrap IHT).

However owning land is not just owning land is it? It is benefitting (or not) from what the local community or local businesses or the taxpayer provides by way of schools, police, hospitals, street lighting, railways, roads etc. Instead of introducing user charges for the NHS, doubling fares on railways and making people pay each time they call the police (on an 0898 number), having LVT comes much to the same thing.

And the rate need not be punitive. It may come as a surprise to learn people who live in smaller homes in cheaper areas of the UK pay up to 3% of the value of their home in council tax (which should be replaced by proper LVT). So a 1% rate is far from punitive. And surely it encourages liquidity if you scrap Stamp Duty as well, somebody looking to buy a home doesn't have to pay up to 4% up front but 1% a year. And so on.

I suggest you read up what Adam Smith, Ricardo, Friedman, Fred Harrison, Samuel Brittan et al say about it first. Or indeed Winston Churchill who made the same point but more elegantly.

[Tory Loyalist]

Anybody care to explain why Master Gove's brilliant plan is so much better than the equity-sharing schemes familiar today?

I'll give you two reasons why it isn't

1) When part-owners come to sell their share there will be endless wrangling as to the division of open market value between land and "bricks and mortar". If their share is 50%, 25% etc of market value no such problems arise.

2) If values continue to rise it is the land element that is likely to soar rather than the "bricks and mortar" so this system will work against the part-owners.

A lot of rubbish is being talked about the effect of new housebuilding on prices. In fact the effect is minimal, as it will always be a drop in the ocean compared with the existing housing stock, the two being part of the same market.

Nor are we building today's executive homes (or even "affordable housing") for the homeless, who are likely to remain homeless. The best of these houses are being built for people who are invading the SE from other parts of the country for purely economic reasons. It would be far better for the country that they stayed put, and a lack of luxury housing for these internal economic migrants would be an extremely good thing.

I would guess much "affordable housing" goes to people who previously lived with their parents. Given that most families are having two or fewer children, many of these people will no doubt inherit homes one of these days. They'll just have to learn patience, just as I did when the manager of the local Abbey National told me to save for two years before applying for a mortgage.

The relaxed lending criteria of recent years has had a disastrous effect upon house prices. I see you can now march into the (Spanish owned) Abbey and demand five times your salary. Madness!

That continued immigration puts multifarious pressures on the lower end of the housing stock is obvious to anyone with intelligence above the level of an imbecile. It's one more reason why immigration should be reduced to a trickle.

Gove's plan amounts to just another Cameroon gimmick, and a desperate one at that.

[Tory Solicitor]

Angelo, I was thinking more of a permanent right to derogate on free movement of workers, each MS effectively deciding their own policy

I agree with contributors above that it is easy to exaggerate the impact of immigration on house prices.

But immigration does give rise to all sorts of housing peculiarities. I have heard that in Lambeth seasonal Portugese workers push themselves to the top of the social housing queue by pretending to be "homeless". The local authority has the money to check up on claims of homelessness by UK citizens but not on the claims of non-UK EU 'citizens'. Can anyone suggest a solution to that issue which is both legal and not costs prohibitive?

[Derek]

If we are to maintain a free market, it must be down to supply and demand. Andrew is right when he says that lenders are willing to lend more money these days, and we also have much lower interest rates which have been sustained for many years.

We must seriously reduce demand by restricting immigration, including within the EU. Unfortunately we can't as we have signed up to free movement of people. We must renegotiate the terms of our membership of the EU, or we are powerless to act.

[esbonio]

Marl Wadsworth

I respect your opinion as I am sure you respect mine and I've thought hard about what I think is a stupid idea.

Your comparison with shares or money in the bank makes my point. Disregarding your reference to corporation tax (which a minor point not all companies pay), I pay income tax on dividends or interest. The government
does not apply a wealth tax on the basis of the value of my shares or my cash (but they would if they could, and if they did no doubt looney acolytres of Caeron might seek to out do it). I only pay CGT on the disposal of the asset. If you want to socialistically widen wealth taxes then at least be consistent and apply it across the board to all assets we own. Why on earth antiques etc should be exempt beats me but it is inconsistent.

I think we have had this argument before.

Tax should be related to ability to pay and I would rather pay more income tax than be forced to pay an inflated wealth tax; on that point even if one were to accept a tax based on a putative value it should be based on the potential yield.

Thanks for the same reading list; I read some of them at university; I then improved my knowledge with a further business degree and hands on expereience of economics and asset management working in the City.

PS

I never thought much of the FT. I seem to recall they were in favour of the ERM; the Sun however got it right. Don't believe everything you read.

[Mark Wadsworth]

Esbonio, it is not inconsistent at all.

You should get what you pay for and pay for what you get. If you've bought an antique, well it's yours, the value is inherent in the thing itself. If you own land, it is only the location that gives it value, and that location (shops, policing, roads etc) only has value because of the continuing efforts of others (or funding by the taxpayer generally).

If you are happy with income tax (a tax charged on individual efforts, i.e. a bad tax) then why are you so unhappy with people paying tax based on value or benefits that accrue to them at no personal effort whatsoever (of course we all hate paying tax, but LVT does not discourage work and the economy or the efficient use of available land, probably the reverse)?

That said, other property-value related taxes (council tax, SDLT, IHT, CGT) are truly awful taxes and should be scrapped.

[esbonio]

Mark

We are obviously completely at cross purposes. I did not see you as an ideologue. Your extrinsic argument could be applied to anything including shares, antiques etc.

I reckon the only common ground between us is hopefully that we both believe in keeping the tax burden low. You however think income tax is bad when I see it as being easy to assess and related to ability to pay. (I do not see what is fair about having to pay a wealth tax for against an asset which is your home and over whose value you have no
control). If my house doubles in value but my income is static why should I pay more.

And since you raised the subject, FWIW my wife and I in common with many people we know get very little in the way of local services. The roads are rubbish, the police are almost non-existent, crime is on the up, and the only thing we feel we benefit from (refuse collection) is erratic. So to be frank I'd rather pay for the services I use direct. Now how about that for fundamentalism.

[Angelo Basu]

Tory Loyalist- I suspect that it would be easier to leave the EU entirely than to get the 27 state agreement that would be required for amendment of the Treaty to remove free movement of workers. As it is one of the fundamental pillars of the Treaty its removal would go to the heart of the original idea of the EU and therefore be far more of a challenge than even the views of those who say "we signed up to a Common Market not a Federal State".

As has been footnoted in the press coverage, Bulgarians and Romanians are, notwithstanding the derogation from free movement, still entitled to be self employed (due to the freedom of establishment and free movement of capital provisions in the Treaty). Removing the free movement of workers provision would lead to more reliance being placed on the other fundamental freedoms in the Treaty and amendment of these would basically involve the dismantling of the whole edifice.

[Mark Wadsworth]

Esbonio, I think we are also agreed that local services are pretty awful in most places, different topic. But an ideologue I am certainly not, I am a "what works" kind of guy with a bit of free-market economics thrown in for good measure.

[DavidTBreaker]

Immigration does push up prices due to increased demand, whether that is increased demand to buy or rent. Both are in effect the same market, as many have bought houses to rent to migrant workers and immigrants. The answer is to restrict immigration and maintain a stable UK population of approx 55 to 60 million. We should leave the EU anyway, so this isn't a problem. An ever increasing population is crazy, as we do not want to destroy the countryside, which is beautiful and needed for farming anyway.

Without any restrictions on building the free market in housing would be damaged, as the building of others could ruin your investment (http://chameleonsonbicycles.wordpress.com/2006/12/11/land-the-exception-to-my-free-market-rules/).

Another thing causing a "buy to let" boom is the government's higher education policy whereby more and more are attending university, and so renting property nearby. I support more people attending university, providing it's a worthwhile degree and/or they are paying, but attending an institution away from home is both more costly and affects the housing market. Why not franchise the degrees out, so students can study what they want at their nearest institution and commute from home? Then the govt wouldn't need to give accommodation grants or build such huge campus sites.

[Denis Cooper]

There are a number of factors which have now driven house prices up beyond the reach of many workers, which are almost all directly or indirectly connected with the unprecedented volume of immigration in recent years, and which will continue to operate if the government continues to allow and encourage mass immigration.

1. The rise in population is almost all down to immigration, and that is projected to continue indefinitely. Anybody who comes to this country will need some kind of roof over their head, and even if some are packed in ten to a house or living in sheds or caravans on farms others are not. Some of those packed in like that are in any case illegals, and are not recognised in any official analysis.

However the Chairman of the South East England Regional Assembly openly admitted that a third of the houses projected in the South East Plan would be needed to cope with the effects of immigration. When I went through the data in the background information on their website the conclusion was that the needs of the established population would be met by building about 19,000 new homes a year - only about 4,000 for the natural growth of the established population, and the rest to account for the trend to lower occupancy. That annual build rate has been exceeded for many years. So if the plan was to build 29,000 a year, the maximum which SEERA now say they want, about a third would only be needed to cope with immigration. If the CBI and other groups got their way and it was 36,000 plus each year, nearly half would be to cope with immigration.

2. Lower interest rates always tend to push up asset prices, including the price of property. The Bank of England has stated that it has been able to hold interest rates down partly because immigration has limited wage rises. Therefore, there is also that significant indirect effect of mass immigration on house prices.

3. Because many of the foreign workers can only afford to rent, or only want to rent, there's been a massive boom in the "buy-to-rent" market, which as I read has provided the best investment returns of all asset classes in recent years. Consequently house prices have become partly detached from the incomes of actual and potential owner-occupiers, and have instead become linked to the volume of accumulated capital available for speculative investment.

4. Because it's now too expensive to buy, many more young native workers are also forced to rent, supporting the returns of the "buy-to-rent" investors. This is why it's projected that the rate of owner-occupation will steadily decline.

The overall result is that the ratio between house prices and incomes is now at its highest level since the peak just after the war, exceeding the two major peaks which have occurred in between, see the chart in:

http://www.thebusinessonline.com/Document.aspx?id=E161BD4B-1844-497D-9A04-207B84C577A0

"House prices most overvalued since 1948"

It's difficult to see any way back which wouldn't involve a huge crash, and as the bubble has been and is being inflated primarily by the effects of mass immigration the government now has little choice but to keep that going and hope for the best.

[Richard]

I'm keen on the idea of LVT but it would have to be set at a low level so that it didn't severely shaft people. In the same way that people have to pay rent to a private landlord based on the value of their property, taxpayers would be paying "rent" to the government. Due to this replication of a common market mechanism, LVT is popular amongst many ultra free market libertarians.

http://www.landvaluetax.org/badtaxes.htm - this shows why other taxes damage economic efficiency in comparison to LVT

[esbonio]

Richard

What do you call a "low level"? The vast majority of people will have to pay any such tax from their income unless they are forced to sell their house, a really potential vote winner that. And as we all know incomes have not kept up with property prices. Nominal incomes are up around 25% under NewLabour; during the same period I reckon some property prices have doubled or tripled.

[TomTom]

What will come is Capital Gains Tax on houses as in the USA.................probably VAT on house sales but none on renovation

[9votes]

Relax the planning rules in already developed areas of our cities. High density development works rather well in places like New York and Barcelona doesn't it?

[esbonio]

Mark Wadsworth

I've just been rereading your July bit on LVT.
I'd forgotten it was for the Bow Group and that you are presumably a tax lawyer or tax accountant?

[TC]

House prices are high for a very simple reason - not enough supply to meet the demand. The reason for this is not a market failure, it is a government one. The planning system is far too restrictive and prevents market forces from working. Deregulate and things will sort themselves out.

People are worried about Britain being overcrowded, but there is no shortage of land - 90% of the population lives on less than 8% of the land. The problem is a planning system that prevents people from building.

Most of my life I have lived in the countryside and of course areas of beauty should be protected. But most of the countryside is now an extremely dull, intensively farmed monoculture. Why not build on it?

[matt wright]

I've long thought the planning laws in Britain are plain mad. We are trying to cram houses into areas drawn on a map by state planners. This seems very un-Tory to me and actually leads to the sort of large dense estates on green fields that most upsets people. As a party we should be looking at ways to free up planning law and switch the emphasis more to that of low density and highly dispersed housing. We should also make it easy for people in rural areas to build another 2 or 3 houses on a plot they own and for young people to build timber homes in open countryside. We should institute a presumption in favour of extensions and small developments on your own curtilage etc. Of course we can protect people from the extreme impacts of bad applications but that should be the main focus rather than petty bureaucracy. Lets make Britain a free mans country again - now that would be a Conservative value to be proud of,

Matt