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

organisation – <strong>the</strong> family – far from being dead is able <strong>to</strong> thrive in some surprising institutional forms.
Recent UK Government statement on CLTs
In his speech <strong>to</strong> <strong>the</strong> Labour Party conference in 2004, John Prescott announced his intention <strong>to</strong> use government
owned land <strong>to</strong> build houses, but using a CLT approach <strong>to</strong> avoid what he called ‘an asset giveaway.’These houses
would be sold <strong>to</strong> key workers and o<strong>the</strong>rs at <strong>the</strong> bricks and mortar cost, but <strong>the</strong> land itself would be kept in
trust <strong>to</strong> prevent <strong>the</strong> initial subsidy being lost <strong>to</strong> <strong>the</strong> market and <strong>to</strong> keep <strong>the</strong> cost of <strong>the</strong> houses down.The ODPM
is now developing <strong>the</strong> details of this scheme
This initiative is <strong>to</strong> be welcomed but <strong>the</strong> CLT approach has <strong>the</strong> potential <strong>to</strong> be applied far more widely than <strong>to</strong> a
few surplus government sites. By separating <strong>the</strong> land from <strong>the</strong> buildings, CLTs allow people <strong>to</strong> own <strong>the</strong>re own
home without depriving <strong>the</strong> rest of <strong>the</strong> community or future generations of community-created value.
Fiscal reform as a way forward
CLTs are generally most applicable <strong>to</strong> new build developments: although it is possible <strong>to</strong> assemble existing
housing in<strong>to</strong> a CLT, it is more difficult and expensive. As 99% of <strong>the</strong> housing supply consists of <strong>the</strong> existing
s<strong>to</strong>ck this is a serious omission. Any fundamental solution <strong>to</strong> <strong>the</strong> housing problem must tackle <strong>the</strong> ongoing
dysfunctionality of <strong>the</strong> market in second hand houses.
The vast majority (80%) of <strong>the</strong> housing s<strong>to</strong>ck is privately owned - and 70% is owner occupied. As land for
private housing is far more valuable than most o<strong>the</strong>r land categories, and land prices are driven by house prices,
reforming <strong>the</strong> dis<strong>to</strong>rted land market is impossible without tackling <strong>the</strong> broader problem of inflated house
prices.The only currently available public policy <strong>to</strong>ols than can have a sustainable impact on <strong>the</strong> price of <strong>the</strong>
existing private housing s<strong>to</strong>ck are interest rates, benefits and <strong>the</strong> tax system.
The first of <strong>the</strong>se is an extremely blunt instrument that has in any case been handed <strong>to</strong> <strong>the</strong> independent
Monetary Policy Commission. House prices have boomed dramatically since <strong>the</strong>y were given control of <strong>the</strong>
interest rate. So far, MPC policy has strongly favoured maintaining house prices in <strong>the</strong> interest of current
owners over promoting affordability for non-owners.
Benefits <strong>to</strong> homeowners have been reformed <strong>to</strong> reduce <strong>the</strong> worst inflationary effects by <strong>the</strong> abolition of MIRAS
and of manda<strong>to</strong>ry urban renewal grants. But many new government programmes repeat <strong>the</strong>se mistakes by
pumping more money in<strong>to</strong> an overheated market. Despite attempts <strong>to</strong> promote intermediate housing schemes
like Shared Ownership, by far <strong>the</strong> most popular scheme has been Homebuy, in which key workers receive up <strong>to</strong>
25% of <strong>the</strong> price as help <strong>to</strong> buy <strong>the</strong>ir own house in <strong>the</strong> private market. It is also intended <strong>to</strong> extend <strong>the</strong> current
Right <strong>to</strong> Buy and Right <strong>to</strong> Acquire <strong>to</strong> a fur<strong>the</strong>r 300,000 tenants (ODPM 2005).This form of demand side
support effectively raises <strong>the</strong> price of housing fur<strong>the</strong>r as more money chases <strong>the</strong> limited number of existing
homes (and repeats <strong>the</strong> self-defeating experience of programmes in <strong>the</strong> US aimed at funding ‘<strong>the</strong> affordability
gap’). Housing benefit is also counterproductive: nearly £16 billion was handed <strong>to</strong> landlords in 2004/5,
increasing yields and so pushing up land prices (Wilcox 2004,Table 114, see also Appendix 7).
Even more perversely <strong>the</strong> tax system provides huge incentives <strong>to</strong> homeownership, which fuels <strong>the</strong> speculative
pressures that drive up prices.The cost of Capital Gains Tax exemption more than outweighs Exchequer gains
Zacchaeus 2000 Trust - <strong>Memorandum</strong> <strong>to</strong> <strong>the</strong> <strong>Prime</strong> <strong>Minister</strong> - May 2005 95