How can the UK’s housing crisis be improved?
The UK is facing a major housing crisis, leaving many young Brits wondering whether they’ll ever land on the elusive property ladder. Gone are the days of buying your first home at the tender age of 19. Now, it’s uncommon to own property until your late-twenties or even mid-thirties.
The housing market hasn’t always been this brutal. However, there are a number of factors which have skewed the system and thrown many into turmoil. Soaring demand for new builds has resulted in higher price tags for new homes, while financial difficulties have made it harder to keep up with the rising costs. Then there’s the issue of affordable housing and why it isn’t so affordable after all, which ties in with mortgage and council tax structures.
It’s easy to see why concern is growing that buying property will eventually be nothing more than a pipedream. Here, we investigate the issue and how the UK housing crisis could be improved.
Increase supply
Currently, property developers are struggling to meet thedemand for new builds. This means those who can afford it are more willing to pay a higher price, making it harder for those with lower incomes to get a look in. Increasing the supply of newly built homes in the UK could reduce cost inflation, making it more feasible for households without vast amounts of savings to buy a new home.
Support for first–time buyers
Offering support to first-time buyers would make it easier for those who don’t yet own a home to buy their first property. The government offers a number of schemes to assist first-time buyers. The Help to Buy ISA is designed to boost savings by 25%, however applications for this closed in 2019, so buyers will only be able to utilise this if they had already signed up for the scheme.
A new Help to Buy Equity Loan was introduced this year and will run until March 2023. This is a shared equity mortgage, where the government will offer you a loan of between 5-20% of a new build. This amount is significantly higher in London (40%). Unfortunately, the scheme is only available in England.
More affordable housing
Prior to 2011, rent for council properties was mainly charged as “social rent.” This amount was determined by the government, based on average property values and average income. However, this was adapted into the Affordable Homes program.
The new “affordable rent” was set to 80% of rental marketvalue, with the plan to use the extra income made from the higher rent to build additional homes. Unfortunately, the “affordable rent” formula didn’t consider the average income of those using council housing.
UK housing charities including Shelter and The Joseph Rowntree Foundation have raised the fact that building more homes which are genuinely affordable and creating moresocial housing would go a long way to address the housing crisis in Britain.
Restructure mortgages and taxes
Hopeful owner-occupiers are losing out on buying a home, despite recent changes made to buy-to-let tax charges. With landlords being able to obtain interest-only mortgages they have the upper hand over other potential buyers. Additionally, council tax isn’t set based on the value of a property, meaning a wealthy household could be paying the same tax as a large family sharing a tiny house. Changing these policies and the way residents are taxed for their property would make home ownership affordable for more Brits.
