SCORCHED PLANET
Housing

Housing a plan part 1

A family house is now an average of £3k pcm 2024.

How do people actually afford this?

1. How Much Does the Landlord Sector Make Per Year in the UK?

  • Private Rental Market Overview:
    The landlord sector's revenue primarily comes from rental income. The size of the UK's private rental sector is significant, with estimates suggesting:

    • Over 4.6 million privately rented households in England alone (English Housing Survey, 2022).
    • An average monthly rent of £1,200 in England in 2023 (varies regionally).

    Using these figures as a rough calculation:

    • £1,200 average monthly rent × 4.6 million households × 12 months = approximately £66.2 billion annually in rental income in England.

  • Additional Earnings:
    Revenue from the sector also includes:

    • Property value appreciation (capital gains).
    • Additional charges (e.g., maintenance fees, service charges).

  • Considerations:
    Landlords' actual profits depend on operational costs (mortgages, maintenance, taxes) and other variables.

How Much Does the Public Sector Spend on Homelessness and Supporting Housing?

  • Homelessness Spending:
    Public sector spending on homelessness includes funding for:

    • Emergency accommodation (e.g., hostels, shelters).
    • Prevention programmes.
    • Support services (e.g., mental health, addiction recovery).

    In 2023, the UK government allocated:

    • £2 billion over three years (from 2022) to tackle homelessness and rough sleeping, through the Rough Sleeping Initiative and other schemes.
    • Local councils also fund additional services, which vary widely depending on the region.

  • Housing Support for the Less Well-Off:
    The public sector spends billions on housing support, including:

    • Housing Benefit: Paid to eligible low-income households to cover rent.
      • Housing Benefit spending was approximately £16 billion in 2021-22 (ONS data).
    • Universal Credit Housing Element: For claimants of Universal Credit, which is replacing Housing Benefit.

    Combined, housing benefits and homelessness support likely exceed £20 billion annually, but this figure depends on specific regional breakdowns and year-to-year changes.

Concept Overview

  • Sliding Scale of Equity Profit:
    Landlords' access to profits from property equity would depend on how long they actively use the property as housing by renting it out. For example:

    • Rent for 5 months = 5% equity profit entitlement.
    • Rent for 20 years = 100% equity profit entitlement.
      If a property is left unused (not rented or lived in), landlords can only claim a small percentage (e.g., 5%) of the equity gain, with the remainder going to the state as tax.

  • Objective:

    • Discourage speculative buying and leaving properties vacant.
    • Increase housing stock availability for tenants.
    • Ensure housing functions more as a social good rather than purely as an investment vehicle.
 

Your idea is an intriguing policy proposal that aims to address key issues in housing, including speculative investments, empty homes, and affordability. Here's an analysis of how it might work, its potential benefits, and challenges:

Concept Overview

  • Sliding Scale of Equity Profit:
    Landlords' access to profits from property equity would depend on how long they actively use the property as housing by renting it out. For example:

    • Rent for 5 months = 5% equity profit entitlement.
    • Rent for 20 years = 100% equity profit entitlement.
      If a property is left unused (not rented or lived in), landlords can only claim a small percentage (e.g., 5%) of the equity gain, with the remainder going to the state as tax.

  • Objective:

    • Discourage speculative buying and leaving properties vacant.
    • Increase housing stock availability for tenants.
    • Ensure housing functions more as a social good rather than purely as an investment vehicle.

Potential Benefits

  1. Reduction in Empty Homes:
    Speculative investors may think twice about holding properties empty since their ability to profit would be curtailed. This could free up housing for renters.

  2. Increased Housing Supply:
    By encouraging landlords to rent properties to secure full equity entitlement, this policy could increase the availability of rental properties, potentially stabilising or reducing rents.

  3. Redistribution of Wealth:
    The portion of equity profit redirected to the state could be reinvested into affordable housing, homelessness prevention, or public services, benefiting society at large.

  4. Long-Term Tenancies Encouraged:
    Landlords would have an incentive to maintain stable, long-term rentals to maximise their equity profit entitlement.

  5. Speculation Dissuasion:
    Investors looking for quick flips or capital gains without contributing to the housing market would be deterred, reducing inflationary pressures on house prices.

Challenges

  1. Implementation Complexity:

    • Monitoring rental activity would require robust tracking systems, such as mandatory landlord registration and regular reporting.
    • Establishing how equity entitlement is calculated over varying timeframes could become administratively burdensome.

  2. Market Reaction:

    • Some landlords might withdraw properties from the market altogether, reducing supply in the short term.
    • Speculative investors might shift strategies or seek loopholes, such as falsely claiming occupancy or rental activity.

  3. Impact on Property Investment:

    • Property might become less attractive as an investment, potentially reducing overall housing development (especially in areas reliant on private investors).
    • However, this could open opportunities for first-time buyers if speculative pressure decreases.

  4. Opposition from Landlords:

    • Landlord associations and property investors would likely resist this policy, arguing it interferes with property rights and discourages investment.

  5. Unintended Consequences:

    • Some landlords might increase rents to compensate for perceived equity restrictions.
    • Investors may shift funds to other markets, potentially reducing housing sector funding.

Potential Adjustments

To address challenges, the policy could be refined:

  1. Exemptions for Key Investors:
    Developers or housing associations building affordable housing could be exempt or face more lenient rules.

  2. Phased Implementation:
    Gradually introduce the sliding scale, allowing landlords and investors time to adjust.

  3. Use of Revenue:
    Ensure equity taxes are transparently reinvested into affordable housing or housing benefits, gaining public support.

Conclusion

This policy concept is bold and addresses critical housing market distortions. While it has the potential to reduce empty homes and speculative investments, it would require careful design and political will to implement successfully. Its success would depend on balancing regulation with incentives to ensure it doesn’t reduce rental market supply or discourage legitimate investment.