That’s according to the Joseph Rowntree Foundation
Restrictions on property purchases made by investors in certain locations should be considered among a package of measures to tackle deep problems within the housing system, a charity has urged.
Scenic rural locations where there is high demand for holiday homes or rundown neighbourhoods where there are high concentrations of buy-to-let properties could be among the places considered for legal restrictions on who can buy housing stock, the Joseph Rowntree Foundation (JRF) suggested.
Tighter mortgage conditions risk the creation of a cash buyers’ market, whereby those with existing capital are able to swoop in and buy properties to let, the JRF argued.
Meanwhile, renters have been coping with worsening affordability and face rapidly rising rents and other costs, alongside restricted social security support, it added.
A new report from the JRF said: “The sheer scale of house price inflation in recent years, on top of entrenched assumptions that prices will always rise, means that the current market downturn is unlikely to reset prices to more affordable levels.
“Instead, market stagnation is the most likely path for the next few years. This is likely to make those who are currently locked out of or struggling to cope in the housing market even worse off, risk serious consequences for the wider economy, and cause long-term scarring of our ability to build enough of the right homes.”
The JRF, which works to tackle poverty, called for structural changes to make the housing system “fairer” in the longer term.
It said the Government should consider replacing council tax and stamp duty with an annual property tax paid by the owner rather than the resident.
Councils should also be able to apply to declare “housing pressure zones”, where they can set the rules about who can buy properties in particular areas. This could be used to restrict investor activity, the JRF suggested.
Its report said: “Property ownership in some places – especially very high demand and very low demand markets – is now so dominated by investor interests that local people looking for a home to live in have effectively been frozen out of the local market.”
The document said that in the longer term the Government should give “local councils the powers they need to impose legal restrictions on who can buy stock in defined areas of particular pressure – which could be due to high demand for second homes, low demand fuelling exploitative lets or regeneration zones attracting speculative buyers”.
Rules could be tailored to local circumstances, the report suggested.
It said: “In some urban neighbourhoods with high prices and significant affordability problems, it might be appropriate to restrict purchases by foreign buyers.
“Scenic villages and coastal neighbourhoods might evidence a need to restrict purchases from second homeowners or holiday let companies, both foreign and domestic.
“For some deprived places in the north of England, stemming the further concentration of buy-to-let properties in rundown neighbourhoods is likely to be the priority.”
The JRF also called for the Government to include various housing measures in the March 15 Budget.
These include empowering and funding councils, housing associations, charities and community groups to acquire stalled sites and redesign schemes to include more affordable housing; increasing the stamp duty surcharge on investor purchases; removing tax breaks on short-term lets to discourage landlords from switching from longer-term lets; and levying council tax on homes in new developments 18 months after planning permission has been granted – whether properties have been built or not.
An “exit route” should also be provided to some homeowners in difficulty, with a scheme which would fund social landlords to buy the homes of mortgaged homeowners in distress, the report suggested.
It added: “Ultimately we have to recognise that a housing system beset by regular booms and busts does not meet the needs of the national economy or those seeking safe, secure and affordable housing, and that a more sustainable, equitable and economically efficient housing system must be one in which house prices do not rise much faster than earnings.”
Darren Baxter, principal policy adviser at JRF, said: “We are facing a housing downturn that will put vulnerable families and our country’s economic prospects into serious difficulty. The Government must confront this head-on and recognise that past approaches will not work this time.
“Instead, the Government must tackle both the short-term fallout from the housing downturn we find ourselves in and the deeper problems within our housing system.”
Toby Lloyd, an author of the report, said: “House prices have been far too high for decades – pushing homeownership out of reach, distorting our economy, and making it harder to provide affordable homes to rent.”
Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), said: “Renters are struggling because there are not enough homes to rent.
“Increasing stamp duty on the provision of the very homes we need would only deepen this supply crisis. It would add further pressure to rents and make saving for a deposit even harder for renters who want to become homeowners.
“It is time the Government accepted calls by the NRLA, the cross-party Housing Select Committee and others for tax measures to encourage the supply of homes to rent.”
A Government spokesperson said: “Increasing the number of high-quality affordable homes is central to our levelling-up mission.
“Since 2010 we have delivered over 632,000 affordable homes in England, including over 162,000 for social rent. But there is much more to do and that is why we’re investing £11.5 billion to build more of the affordable, quality homes this country needs.
“We are already taking action to combat the adverse impact that second homes can have on local communities – particularly in tourist areas – by closing tax loopholes, introducing higher rates of stamp duty and empowering councils to apply a tax premium of up to 100% on second homes.”