Is help to buy not helping? What about a fairer rent?

Owning property is arguably key to building a family’s stable and secure future.

Not only is it an asset in itself, but it takes away our worry about the affordability of our home once we retire. We can invest not just our money in that home, but also invest our time, effort and love to make it a place we want to live in.

Not surprisingly, therefore, getting on the property ladder so you can work towards owning your “forever home” is so important to us in the UK.

But this is increasingly hard and unaffordable.

What could a government (locally, regionally or nationally) best do to help?

  • set rules to ensure fairer & affordable rents
  • provide help to buy a first property
  • some other way to help (please tell us more)

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While there have been some moves by the UK government to "help to buy and “stamp duty holidays”, this might put even more pressure on prices of first-time properties, keeping them unaffordable.

How are you supposed to save for an ever-increasing deposit while paying sky-high rents? Might it be better to control rents, making it easier to live and save, and reducing the returns on buy-to-let activity?

What do you think? Would this work? Would it help?

What do YOU need?

I’m not in favour of schemes such as Buy to Help or other incentive schemes (Help to buy ISA?) as I believe they artificially help keep property prices higher than they otherwise would be.

However, I am also not in favour of rent controls or unecessary restrictions (or taxes) on landlords either as such costs ultimately lead to higher rents and less availability of rented accommodation.

What I think is needed is new house building with the increase in housing stock eventually leading to lower prices (especially if the incentive schemes are removed) - it also has to be the right kind/size housing not just blocks of small one bedroom apartment… and the planning system more directive/flexible to ensure this.

Many countries have investors funding long term rented accommodation as they appreciate the secure income flow.

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I completely understand where you are coming from @gt94sss2 but we’ve been ‘knocking on the door’ of increased building programmes and housing stock for as long as I have been aware of the issue, and it has not happened.

Commercial builders aren’t incentivised to build so much the prices fall. On the contrary, they are incentivised to build those “blocks of small one bedroom apartments” as they sell for loads of money as long as they do not offer alternatives

Where’s the ‘Incentive Alignment’ here?

While having long term regular income from rental properties is great for landlords, what happens when a large number of people reach retirement ages and do not own a property and need to pay rents out of their retirement funds?

I think there needs to be a balance between it all.

I don’t agree with the Help to Buy scheme as the bonus is paid AFTER the whole transaction goes through… so a bit pointless to me?
The idea of having a boost/increased interest rate on savings for just a first property is a really good idea though and I’ll admit that I’m benefitting from this… at the end of the day it’s become so much harder to buy properties in the recent years so I do think there needs to be some support to get on the property ladder.

Also I think rent does need to be cheaper, I’ve seen rent prices the amount of monthly mortgage repayments which is ridiculous! Each individual person has different circumstances so I think lower rent so people can also save some of their wage to be able to buy a property eventually.
I know there are also people who prefer to rent but let them save so they can enjoy their money however they please too…

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This is where the planning system could be more effective.

For instance:

  • Turn down planning permission for blocks of “one bedroom apartments”

  • Not waiving the percentage of affordable accommodation a complex must include

  • To prevent stockpiling of land, once permission is granted, insist that properties are built in a set time period or the permission goes. (Or they face financial penalties)

  • Compulsorily purchase land that large firms are stockpiling and haven’t published plans for then

I believe such systems work well in many other countries like Germany.

My concern is that present policies seem to artificially keep prices high or target landlords which I believe will actually lead to lower supply of housing or higher rental prices (as costs are passed on)

Capital gains on all private housing should be 75%.
Remove the incentives for home owners to push up prices constantly.
Equity and income should determine moving up the ladder, not some unrelated economic function that decides you gained £20,000 year on year of artificial value.
Owning a house should not create wealth.
This will also stop new builds rocketing in price each year as no one will buy a 2 bed rabbit hutch for £500,000 when you can pickup a 3 bed house for the same, this will force new builds price down.
House builders still want to make a profit so… funnily enough will build homes still.
At the moment there is no negative or competing force on house prices.
No stamp duty
No Capital gains tax (on main home)
Borrowing availability is pumped by help to buy schemes
Plenty of land available

Atm House prices just like stocks only go UP…

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That might be a reflection on someone’s age/experience? It’s been a long time since we have had what I would call a “traditional” recession in the UK

House prices and stocks have fallen, sometimes quite sharply in the UK - though of course things like help to buy mitigate against this.

And that’s not to consider the last couple of decades in somewhere like Japan where asset prices are much lower than they once were.

I don’t think you could have a clearer indication that the whole system has been tilted horribly in favour of people with the means to buy a 2nd (or more) home than people being forced to rent at the same cost as a mortgage…

Help to buy isn’t really help to buy, its a bonus for homeowners who want to sell. With a shortage of housing, subsidising first time buyers really just inflates/props up values for sellers.

Totally agree that landlords should pay more tax - stopping landlords getting higher rate tax relief on mortgage interest charges was a small step in the right direction. These sorts of policies will of course, do nothing to get anyone elected.

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But it also led to an increase in rents as landlords sought to protect their yields and treats their businesses differently from others…

What we really need in the UK is for interest rates to increase to the historic average. Yes, it will cause problems for some but lead to more realistic asset prices and more rational investment decisions as well as being good for savers.

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True, I hadn’t considered that. The whole system is so horribly unbalanced that no small change is going to help… and nothing that will seriously help non-homeowners at the expense of homeowners/landlords will never be popular.

Interestingly, but not intuitive at all, that the single most important factor of house price in the UK (and many other developed and densely populated countries) is the interest rate (gilt yield). It’s not a coincidence that we have both historically lowest interest rate and most unaffordable house price at the same time.
But unfortunately, knowing that isn’t going to help anyone to fix the issue immediately. Increasing the interest rate and the gilt yield at the moment isn’t really an option for the Bank of England and the government, because that will devastate the entire economy and make the unemployment rate skyrocket high.
Well, then what can and should the government do? The should deal with the coronavirus and Brexit efficiently and appropriately, restore the growth of the economy as soon as possible, and when the market confidence is restored and the economic growth is back on track, the interest rate can then gradually go up (presumably after the near £900 billion QE is wound down first) and the housing market growth will cool down as that happens.
In short, the government should focus on what they have control over and do their best to deal with the urgent and important matters, and by doing that, it will eventually benefit both the renters and the home owners.

As you say, difficult to control these things…

While it might not be optimal, wouldn’t building lots of new (decent) houses against the objections of land/home owners be a start?

Usually, an asset’s price is determined by the supply and demand. But residential property price is different. Build more houses alone isn’t going to bring the house price down by much. The effect will likely be very minimal.
First, developers aren’t going to build an insane amount of new homes that’s hard to sale when completed, so even government policies encourage them to build more, they will only build a moderate number of new homes. Therefore, we are not going to see blocks of empty homes, or developers desperately want to sale their new built.
Second, if and when the house price does go down a bit due to the extra supply, while everything else remains unchanged, property investors will buy more, and the extra demand will keep the price high.
So you asked, why do investors keep buying properties? That’s because lower interest rates increase the value of future income flows, therefore investors (and banks) are willing to pay (lend) more to own properties and their future income flows. In fact, the same is also true for stocks and shares. The FTSE 250’s CAPE (cyclically adjusted PE ratio) has been going up in tandem with the house price.
Can’t we make them pay more taxes to discourage them from investing in properties? No, that doesn’t help either. Because the investors will simply pass on the extra costs to renters, and don’t forget, a raising rent will push the house price even higher.
Having said that, I still believe we should build more homes. Although they won’t put much downward pressure on the house price, they will definitely help preventing the price going up due to insufficient supplies.

There has been a significant programme of development in Devon over recent years but I am not convinced it is well considered, with all towns and villages expanding but little improvement to the underlying infrastructure and more people being encouraged to live at a distance from where they work, increasing daily commuting and private/commercial vehicle usage on already busy/tired roads. Surely we should be investing in making our cities more attractive places to live with good public transport and connectivity if we are to be a sustainable society, notwithstanding the challenge of the current pandemic which has turned everything on its head.

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I do agree that the effect of the pandemic on homeworking has not yet worked its way through the system.

If we do change our habits, it will make it easier to live away from cities, and therefore put pressure on rural (or suburban) properties, and by extension on that local infrastructure. I’m guessing we won’t be 100% remote whatever happens, so you still need to be able to travel into offices and customer sites.

Of course, more flexible working also might mean a greater potential for a flexible workforce, increasing the need for rental property rather than buying?

It will also increase the need for larger properties that make working and living in the same space, more pleasant.

So it might not actually help anyone in terms of their FINANCIAL wellness, even if it helps their mental health or physical health.

Stepping back a little, the point of buying a property is not just the increase in value of the property as an asset. It is the fact that owning the property is an insurance against housing insecurity in your retirement.

Planning for a healthy & secure retirement is already hard enough, but if you don’t know how much you are going to have to pay to keep a roof over your head when you don’t have an income, that is something that will definitely be stressful.

That is a key element of what we mean by Financial Wellness - making financial planning decisions that take away that insecurity and allow you to make positive choices.

How do you picture your retirement home? Is it a traditional family home, or do you think we waill change to living more flexibly? Or maybe move onto a cruise ship? :wink:

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I agree also. I don’t think that we quite know the impact of working remotely yet. But working remote does give a lot of people more opportunities to work in different companies without having to move locations.

I don’t think the help to buy scheme is massively working. I think the Government need to get more creative.

Now I know this idea is slightly reaching for the stars. But they have been able to do create the furlough scheme. Why can’t they do something similar for people who would like to buy a house? You enter the help to buy scheme, the deposit is then calculated and how much you will need to save and then the government will support a portion of your rent for you to help you to save the money for the house. This is very much in an ideal world.

At the moment I am a bit of a city kid. I like that things are always available and get be fixed quickly and everything I need is a 10 minute walk away. I guess my retirement home would be somewhere that is still near my family (so I can annoy them and get them to buy groceries). I don’t think I would like to be in a massive house. I like the idea of something smallish but well connected.

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