Housing market must be fair to buyers and renters
◆ Legislation, house building, reduced taxes and investor encouragement needed, writes David Alexander
It is clear that housing is going to be a key issue in this year’s general election. Michael Gove’s numerous media appearances last weekend highlighted the view that housing – both renting and buying – has risen to the top of the agenda for many voters.
Gove identified tenants and first-time buyers as key targets. Both groups have experienced far greater difficulties in recent years than previous generations and he is right to say that more needs to be done to ensure tenants feel more secure and that homes are easier to buy for first-time buyers. For renters, the Government is already some way toward having the Renters Reform Bill in place before an autumn election. This bill mostly replicates the Private Residential Tenancy Scotland Act which was implemented in December 2017 which gave more protection for tenants.
This has created a more stable and secure environment where tenants feel protected, which encourages them to stay longer in their tenancy. For landlords and property investors an endless churn of tenants is simply bad business. Most in the private rented sector in Scotland believe the bill has been a success. Therefore, the Westminster bill should be welcomed as long as landlords and investors feel they have been appropriately consulted.
For first-time buyers (FTBS) the issue is complex. England already has a much more favourable stamp duty regime with FTBS only paying tax on properties costing more than £425,000 compared to £175,000 in Scotland.
There has been talk of reducing the level of deposit required to 1 per cent, developing special 99 per cent mortgages for FTBS and perhaps even relaxing some of the affordability criteria.
While these ideas may seem laudable and would undoubtedly give an immediate boost to the market in the short term the concern is that they are artificially assisting the current generation of voters but ultimately punishing the next because these proposals will push prices up, making homes less affordable in the future.
Easing mortgage affordability and Ftbspecific mortgage products are trickier since they can lead to future debt issues among buyers. Mortgages rates are already falling and are likely to fall further in the coming year so it would be more sensible to let the market decide. Adjusting stamp duty overall could be a more sensible approach. Even without an election such a move should be introduced in Scotland to level the playing field with our English counterparts to make buying property more attractive to Scottish buyers and to ensure our housing market is fairer.
We want a housing market that is stable, secure and provides sufficient homes for people in the rental and homeowning sectors. Too much interference and you end up causing all sorts of problems, but incremental encouragement and financial incentivising can be a way of directing the market toward growth.
What is needed is a system that quickly meets the needs of renters and first-time buyers through a mixture of legislation, house building, reduced homebuying taxes and encouragement for investors to engage with the market. Next month’s Budget will give a strong indication of how important housing will be in the forthcoming election.