Maidstone Weald Labour Party

Leslie Turner from West Branch has pointed us in the direction of this article from the Guardian




By pandering to those who own their homes, politicians fuel a very damaging dependence

Adam Sampson
Friday October 12, 2007
The Guardian

Elections, even phoney ones, tempt politicians back on to safe turf. The past few days have signalled that the traditional electoral signifiers - crime, health, education - have been joined by another: home ownership. With homeowners in 70% of households, there is an inbuilt majority in favour of measures to protect their status. The political strength of pandering to this pressure group by promising cuts to tax on housing wealth - stamp duty, inheritance tax and capital gains tax - has been great enough to turn the polls, delay an election and force last-minute changes to Labour's pre-budget report.Worship at the altar of home ownership is clearly good politics, but is it good policy? There are reasons to believe so. Surveys show that 84% of people want to own a home in the next 10 years. Ownership creates stability, improves behaviour. It is lauded as a solution to declining neighbourhoods and estates - entice homeowners and you create a critical mass with an interest in investing in a community's future.
But is the consensus in favour of ownership right? Ownership is not an unmixed blessing: many poorer owners find themselves with an asset but no income to maintain it, and the cost of getting into the market is spiralling.

Nor is it necessarily in society's interests to encourage ownership: a Bank of England adviser pointed out that countries with higher levels of ownership tend to have higher rates of unemployment because of the adverse impact of ownership on labour mobility. It is also worth questioning what impact the stampede of capital into bricks and mortar has on the wider economy: with British mortgage debt already more than £1 trillion, is it wise to encourage more borrowing to invest in something as economically unproductive as houses?

The truth is that the virtues of - and desire for - ownership have been oversold. We have confused the advantages that come from home ownership with the desire for wealth acquisition. People want to buy because they see it as the quickest and surest way to get rich: wealth acquisition is far more commonly cited in surveys of aspirant owners than security or status. Given three decades of vertiginous house-price inflation, that is no surprise. Housing has been a far safer investment bet for many than pensions or the stock market.

But politicians may be taking too short-term a view. Things may look different to voters if prices go down, and the creaking in the mortgage market signalled by the Northern Rock fiasco swells into a fullblown repossessions crisis. The rush to ownership has, moreover, artificially inflated house prices, fuelled by cheap borrowing, and created massive divides: housing now accounts for more of the nation's wealth than anything else, and that wealth is increasingly in the hands of older people, with under-35s locked out unless their parents recycle some of their own housing wealth. The UK economy is dangerously dependent on housing: the decade of growth has arguably been sustained by the feelgood factor created by rising housing wealth. No one can look at the impact on the US economy of the housing crash without worrying how a similar downturn would play out here.

It is time to reassess the push for ownership. The recent recognition by Labour that house-price inflation has largely been caused by undersupply is very welcome, as is its commitment to increased housebuilding. But we should also think about taking the heat out of the housing market by weakening the link between ownership and wealth acquisition. However, the inheritance tax challenge laid down by George Osborne and picked up by Alistair Darling will only strengthen that link. When one adds the - apparently inadvertent - effect of the reduction of the capital gains tax rate on second-home ownership and buy-to-let, you have fuel for a sharp increase in demand.

What we have is a classic disjunction between two policies, housing and taxation. Promoting affordable housing means making it more difficult to gain wealth by investment in home ownership. It means increasing taxation on the increase in the capital value of homes, not reducing it. It means reviewing the council tax system or examining the possibility of a land tax. It means using inheritance tax to reduce the growing wealth divide.

And this goes far beyond mere policy. Home ownership is driving a return to wealth disparities that we have not seen since the Victorian era. Whereas the space that rich people occupy is increasing, the poor are living more cramped lives. And the rise in house prices is reducing social and geographical mobility, with people far less able to move from the north to the south or from poorer areas to richer ones.

Resisting pressure from any interest group as powerful as homeowners is difficult for governments in normal times. In the febrile political atmosphere of the past few weeks, it has proved impossible. It is vital that the government now uses the 18 months or so before election fever strikes again to take a more sober, considered look at how taxation can achieve the long-term aim of creating a more equal and successful (and decently housed) society