Yes that’s right, everyone supports higher house prices! Ok, its an exaggeration but rather a lot of people do – ranging from home owners to developers to politicians. Why is this? It might seem odd when there always calls for affordable housing. Well existing home owners often feel that as the value of their property increases they are more affluent. Well they are and they arent. As most people actually live in the house they purchase, if their house prices goes up its usually the case that everyone else is in the same situation. Ok, it makes people feel better – but thats a bit on an illusion.
Developers and landowners selling land for housing obviously want house prices to rise -the higher the price the higher the profit. Then of course we have the bizarre situation of where higher house prices are considered a good thing as it is then – in theory possible to provide affordable housing! Really bizarre, if house prices were lower and affordable the problem would not exist.
Then of course we have property investors – those who see property as means of making money either through rising value (it works if you have more than one house!), or from renting the property preferably for leisure purposes. For these groups property is a means of making money.
Politicians – probably most are property owners so have a vested interest in rising house prices – yes they are suffering from the illusion too! And you can imagine that if a political party stated its aim was to reduce house prices then there would be outbursts of outrage and criticism on all sides.
Measures to ‘resolve’ the housing problem unfortunately do not get to grips with the problem. Increased property taxes suffer from their regressive nature and are likely to be seen as a source of revenue rather than a means of reducing house prices. Options such as Land Value Tax – rely on house prices increasing and treat everyone as if they were housing speculators and fail to address the real issues.
So what is to be done?
In essence we need to suck demand out of the system. This means severely limiting the potential for investors whether from Hong Kong or Hounslow to push up house prices by pumping money into the system. We need a progressive wealth tax to limit the amount of ‘spare’ cash available for house purchase. We need actual limits on how much housing an individual or household can own. We need to limit demand for second homes and leisure renting. We need a more equitable distribution of income. And, we also need to do away with the obsession for population growth. Population growth allied with excess funds leads to higher house prices.