It’s amazing the capacity some policy wonks have to identify a problem and then come up with a completely wrongheaded solution.
So it is with the latest report from the Housing and Finance Institute. The authors insist that rather than cutting stamp duty, the Government should be subsidising people to buy houses. Their argument is that private renting introduces uncertainty into family life, therefore we should have less of that, thank you very much.
In fairness, the report does acknowledge one of the great truths of the housing market – that it’s linked to the unemployment level. This has been pointed out for both the UK and US markets. Whisper it quietly, but it is actually possible for the home ownership rate to be too high. The logic is that as economies change, jobs are relocated and people need to be able to move home to take up work elsewhere. In a society where most people are owner occupiers, that can become a very expensive matter.
High home ownership can mean lower labour mobility and a higher unemployment rate than there might otherwise be. It follows that having a thriving rental sector, one that is more liquid, means the unemployment rate is lower. Nor will increasing the amount of social housing improve things. Mobility among social renters is actually even worse than among owner occupiers, as it’s near impossible to gain social housing outside the local authority one is already in. Too much social housing therefore contributes to unemployment.