Call to restrict property investors

JRF charity suggests limits on housing purchases in some areas, reports Vicky Shaw

Restrictions on property purchases made by investors in certain locations should be considered among a package of measures to tackle deep problems within the housing system, a charity has urged.

Scenic rural locations where there is high demand for holiday homes or rundown neighbourhoods where there are high concentrations of buy-to-let properties could be among the places considered for legal restrictions on who can buy housing stock, the Joseph Rowntree Foundation (JRF) suggested.

Tighter mortgage conditions risk the creation of a cash buyers’ market, whereby those with existing capital are able to swoop in and buy properties to let, the JRF argued.

Meanwhile, renters have been coping with worsening affordability and face rapidly rising rents and other costs, alongside restricted social security support, it added.

A new report from the JRF said: “The sheer scale of house price inflation in recent years, on top of entrenched assumptions that prices will always rise, means that the current market downturn is unlikely to reset prices to more affordable levels.

“Instead, market stagnation is the most likely path for the next few years. This is likely to make those who are currently locked out of or struggling to cope in the housing market even worse off, risk serious consequences for the wider economy, and cause longterm scarring of our ability to build enough of the right homes.”

The JRF, which works to tackle poverty, called for structural changes to make the housing system“fair er” in the longer term.

It said the Government should consider replacing council tax and stamp duty with an annual property tax paid by the owner rather than the resident.

Councils should also be able to apply to declare “housing pressure zones”, where they can set the rules about who can buy properties in particular areas. This could be used to restrict investor activity, the JRF suggested.

Its report said: “Property ownership in some places – especially very high demand and very low demand markets–is now so dominated by investor interests that local people looking for a home to live in have effectively been frozen out of the local market.”

The document said that in the longer term the Government should give “local councils the powers they need to impose legal restrictions on who can buy stock in defined areas of particular pressure – which could be due to high demand for second homes, low demand fuel ling exploitative lets or regeneration zones attracting speculative buyers”.

Rules could be tailored to local circumstances, the report suggested.

It said: “In some urban neighbour hoods with high prices and significant affordability problems, it might be appropriate to restrict purchases by foreign buyers.

“Scenic villages and coastal neighbour hoods might evidence a need to restrict purchases from second homeowners or holiday let companies, both foreign and domestic.

“For some deprived places in the north of England, stemming the further concentration of buy to-let properties in run down neighbourhoods is likely to be the priority.”

The JRF also called for the Government to include various housing measures in the March 15 Budget.

These include empowering and funding councils, housing associations, charities and community groups to acquire stalled sites and redesign schemes to include more affordable housing; increasing the stamp duty surcharge on investor purchases; removing tax breaks on short-term lets to discourage landlords from switching from longer-term lets; and levying council tax on homes in new developments 18 months after planning permission has been granted – whether properties have been built or not.

An “exit route” should also be provided to some homeowners in difficulty, with a scheme which would fund social landlords to buy the homes of mortgaged homeowners in distress, the report suggested.

It added: “Ultimately we have to recognise that a housing system beset by regular booms and busts does not meet the needs of the national economy or those seeking safe, secure and affordable housing, and that a more sustainable, equitable and economically efficient housing system must be one in which house prices do not rise much faster than earnings.”