London – causes of house price inflation identified but ignored when solutions proposed!

A new report – HOUSING AND INEQUALITY IN LONDON, by Tony Travers, Sam Sims and Nicolas Bosetti, Published by Centre for London, April 2016 – looks at rising inequality in London.

Increasing house prices are seen as the cause of the problem.

The report asks Why have prices risen so much in London?

On the demand side, sustained economic growth, sustained
population growth and sustained inward migration have
all pushed up demand.

So what solutions are proposed?

In the light of the causes outlined above it might be expected that actions to reduce population growth particularly inward migration would be proposed. Reducing increasing disparities in income would also be considered. After all people on higher incomes have a disproportionate impact on house prices. Measures to restrict rich foreign residents from purchasing houses in London would also seem logical. Purchases by this group have had a significant effect on house prices.

But what do the authors conclude (apart from the usual simplistic response of ‘build more houses’).

Reforms to the system of land/housing taxation could help mitigate the impacts of house prices on living standards. At
present, the council tax system does not provide strong incentives for the effective use of housing by affluent households in London because it does not accurately reflect property values. This is largely because central government has failed to revalue the council tax base since it was introduced, meaning many homes which
have increased in value are now under-taxed.

Changing the council tax system is at best an irrelevance – it would not deal with the causes of house price inflation, at worst it would add insult to injury as many households would find their council taxes increasing in stark contrast to their incomes.

This report like many others completely fails to address the real issues and solutions. A sad reflection on the housing discourse and its practitioners.


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