The Government could turn a generation of renters into owners. And it wouldn't cost a penny.
We hear time and time again that we are in the middle of a housing crisis. And it’s true. Since the mid-1990s, house prices have risen by 160% in real terms. Given that young people’s income has only grown by 23%, it’s hardly surprising that in 2018, just a quarter of young people own their homes – compared to two-thirds as recently as 1995.
Why does it matter?
It matters because polling shows that ownership gives young people a greater sense of freedom and control over their lives – and helps them to feel more settled. Home owners are more likely to participate in community organisations and will, on the whole, be more politically engaged. Most importantly, the impossibility at present for most young people to own rather than rent leaves many feeling that they no longer have a stake in society.
One huge barrier for young people when trying to buy a home is the vast deposits required. While many might be able to afford the mortgage payments, which in some cases are lower than their current rents, the idea that the average twenty-something has a spare £20k is laughable.
The challenge, then, is to turn renters into owners.
One of the most striking changes in the property market in recent decades has been the rise of private renting. But too often, discussions on how to reverse this trend focus on punishing landlords by, for example, increasing charges on buy-to-let.
No one should be punished for having made sound investment decisions. Which is why we at the CPS propose a new scheme ‘Help to Own’ scheme.
The scheme would involve turning the Capital Gains Tax payable by a landlord on sale of a rented home into a rebate shared between landlord and tenant. The landlord has an incentive to sell, and the tenants have some extra cash to help them buy their own home. Win-win..
The scheme is cost-neutral (always a bonus when pitching an idea to the Treasury…) as the sales wouldn’t have taken place without the scheme, meaning the government wouldn’t be losing any money. In fact, it’s likely that it in the long term it would generate revenue, because fewer renters would apply for housing benefits from the government.
As the polling expert Matt Singh has shown, 77 per cent of the swing towards Labour at the last election can be explained by the increasing number of young renters and the falling number of young owners. Results from CPS polling back him up: according to our research making housing more affordable is the number one way young people believe that the Government could make their lives better.
It’s been said a million times before, but apparently it needs saying again: unless the Conservatives tackle the housing crisis soon, they may well be handing Jeremy Corbyn the keys to No 10.