Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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developers at <strong>the</strong> point of sale or of planning permission being granted.This simply added a fur<strong>the</strong>r incentive <strong>to</strong> hold land ra<strong>the</strong>r than <strong>to</strong> release or develop it.These measures cannot be considered genuine taxes on land rents. Ra<strong>the</strong>r <strong>the</strong>y are taxes on development. Development taxes discourage development.This is counterproductive and places fur<strong>the</strong>r pressure on developers who are already severely squeezed between high land prices and government interventions. A true land value tax would be levied annually on <strong>the</strong> unimproved value alone.This would have <strong>the</strong> opposite effect of previous development taxes, and would stimulate <strong>the</strong> construction market by making housing cheaper <strong>to</strong> build and developers less risk averse. Realpolitik Significant reforms in well-established political systems are usually impeded by some combination of three fac<strong>to</strong>rs: • lack of new ideas (<strong>the</strong> thoughts have not yet been thought) • inertia and <strong>the</strong> power of conventional wisdom (things are done <strong>the</strong> way <strong>the</strong>y are done) • <strong>the</strong> balance of power is against <strong>the</strong>m (<strong>the</strong> reforms offend more interests than <strong>the</strong>y please) There is an additional barrier in <strong>the</strong> form of a lack of collective memory amongst civil servants and politicians alike. No one in Government has <strong>the</strong> clarity of vision on <strong>the</strong> land issue of Uthwatt in 1941 or on <strong>the</strong> health and housing issue of Addison in <strong>the</strong> early 1920s (Appendix 1). In this context <strong>the</strong> prospects may now be promising for some fundamental reform of land supply and housing provision practices in <strong>the</strong> UK, especially in relation <strong>to</strong> CLTs.The ideas go back at least 100 years and are being implemented in many countries around <strong>the</strong> world.The thoughts are being thought by both housing suppliers and development participants as existing practices are revealed <strong>to</strong> be increasingly unable <strong>to</strong> cope. Such is <strong>the</strong> flow of innovative ideas and discussion that <strong>the</strong>re are some signs of a break-down of inertia in key institutions such as long-term funders, <strong>the</strong> Housing Corporation, English Partnerships, <strong>the</strong> Treasury and <strong>the</strong> ODPM. The key change may be <strong>the</strong> real balance of power and interest among <strong>the</strong> various participants <strong>to</strong> <strong>the</strong> development process. It seems highly significant in <strong>the</strong> United States that it is some city governments that are now firmly behind <strong>the</strong> CLT and mutual housing provision arrangements.This is primarily because <strong>the</strong>y are aware that public support arrangements <strong>to</strong> plug <strong>the</strong> affordability gap are becoming ever less cost-effective. Ei<strong>the</strong>r more and more is spent on <strong>the</strong>m <strong>to</strong> keep pace with <strong>the</strong> ‘affordability gap’ or else <strong>the</strong> spending on <strong>the</strong>m is cut and <strong>the</strong> problem manifestly gets worse.This seems <strong>to</strong> be a very accurate characterisation of <strong>the</strong> lasting predominance of demand side subsidy in <strong>the</strong> British case. More and more is spent on Housing Benefit and tax concessions <strong>to</strong> owner-occupancy.This may well be having some ameliorative effect on housing conditions but not really on housing supply. It also has <strong>the</strong> well-recognised side effect of exacerbating inequality. It may well be that <strong>the</strong> real balance of interests is now moving in favour of reform.When listing who is in favour of escalating land and house prices and who is against, <strong>the</strong> balance is becoming more evident.Those in favour of present high prices appear <strong>to</strong> be a narrow group of interests comprising land specula<strong>to</strong>rs, <strong>the</strong> house purchase lending industry, some vendors of land for development (but by no means all) and all those interests that live off a percentage of values.Those against include <strong>the</strong> vast majority of employers (lower housing costs mean less Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005 97
upward wage pressure and fewer recruitment problems hence <strong>the</strong> More and Better Homes campaign for a stronger supply side response discussed in Appendix 12), <strong>the</strong> Government (support payments get more and more expensive and less effective), city and local government (high housing costs are a disincentive <strong>to</strong> location and impede local economic development) and even perhaps many housebuilders (for whom playing <strong>the</strong> land market may be an unhelpful complication).The latter group seems collectively more weighty than <strong>the</strong> former. That leaves people at large as an interest group.The conventional wisdom is that escalating house prices suit <strong>the</strong>m well, once <strong>the</strong>y have achieved a ‘foot on <strong>the</strong> ladder’. But <strong>the</strong> issue is habitually perceived in terms of growth of unrealised paper value not of growth in <strong>the</strong> proportion of lifetime earnings committed <strong>to</strong> ownership. There is also increasing unease amongst homeowners about whe<strong>the</strong>r <strong>the</strong> habitual instabilities in house prices will cause negative equity <strong>to</strong> strike again. Some are concerned with <strong>the</strong> felt obligation <strong>to</strong> help finance <strong>the</strong>ir grown up children as <strong>the</strong>y seek <strong>to</strong> buy a suitable home. For o<strong>the</strong>rs <strong>the</strong>re is concern about <strong>the</strong> manifest unfairness of denying large proportions of <strong>the</strong> poor <strong>the</strong> standard of housing and tenure security enjoyed by those who are not poor.These fac<strong>to</strong>rs probably all contribute <strong>to</strong> <strong>the</strong> finding that 71% of people feel we have a housing crisis (Appendix 12). Present arrangements are creaking and reforming ideas are being advanced and implemented by an articulate group of enthusiasts. It will be interesting <strong>to</strong> see how <strong>the</strong> realpolitik works out over <strong>the</strong> coming years and decades. 98 Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005
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Z2K ZACCHAEUS 2000 MEMORANDUM <stro
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2 First published in Britain in 200
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Introduction The Prime</str
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6 Zacchaeus 2000 Trust - Me
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8 Zacchaeus 2000 Trust - Me
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Recommendation 2 Policy should buil
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Recommendation 10 Increased resourc
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The shaded boxes along the<
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RSLs have no direct electo<
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4. Of the
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Similarly in urban regeneration sch
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3. Increases in the</strong
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There may be some inconsistency in
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(a) producing units of a quality su
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28 Zacchaeus 2000 Trust - M
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Fund they stress t
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homeless by local authorities (itse
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compared to 46% in
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approximately threefold rise in rea
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End of 1998 28,700 End of 2000 120,
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‘...stock transf
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Page 51 and 52: Housing Association 3 Private Landl
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Memorandum-to-the-Prime-Minister-on-Unaffordable-Housing

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