Urgent reform of the housing market needed

The Joseph Rowntree Foundation (JRF) has called for urgent and fundamental reform of the housing market after the failure of policy-makers to learn the lessons from previous boom and bust cycles, which have led to the UK having one of the most persistently volatile housing markets in the world.

Convened by JRF in 2009 and consisting of interdisciplinary experts, the JRF Housing Market Taskforce has undertaken a system-wide review of the UK's housing market. Its report recommends a series of policy options that together would help create a more stable housing market, to protect existing home owners and enable more new households to get onto the property ladder.

Recommendations to help reduce house price volatility include:

An increase in the supply of housing
Supply is central to managing house price volatility. The scale of the increase required, however, means that this alone will not reduce volatility in the market.

The reform of both Stamp Duty and Council Tax
These existing taxation tools could help to reduce house price volatility in the shorter term. Both Stamp Duty and Council Tax should be linked to the real value of a property and regularly updated.

Stamp Duty: the current 'slab' structure of stamp duty should be replaced with a 'slice' structure whereby only the value that exceeds the threshold is taxed or taxed at a higher rate (similar to income tax). Thresholds should be uprated regularly in line with consumer price inflation.

Council Tax: in the short-term, the number of bands should be extended. In the medium term, there should be a move towards a system based on a fixed percentage of a property's value. In the long-term a national property tax could be created with safeguards for low-income households.

A better safety net for homeowners based on shared responsibility between lenders, borrowers and Government
The current safety net for homeowners is inadequate and has required extensive Government intervention during downturns.

Lenders need to lend responsibly, achieving the right balance between access to mortgages and the risk of default.

Active steps need to be taken to improve borrowers' financial capability to ensure they have sufficient information and skills to make informed choices about what they can afford.

A partnership insurance model with contributions from borrowers, lenders and government should also be adopted to meet mortgage payments when borrowers lose income through redundancy or illness.

Speaking today at the launch of the report, Julia Unwin, Chief Executive of the JRF, said: "Since the 1970s, there have been four boom and bust cycles in the housing market. This persistent instability distorts housing choices, inhibits house-building, and drives arrears and possession rates, putting people at great risk, and creates wealth inequality between the generations.

"We have set out to provide a series of policy options that together would help provide long-term stability in the market. I urge policy-makers to look at these and act now, because the seeds of the next housing boom have already been sown."

imove Cornwall Senior Partner Mark Green says “The instability in the UK housing market has caused a great deal of suffering to many people, reform is something we feel passionately about.  In recent years home owners in Cornwall have seen their house value decline and for many people they are in, or close to negative equity, a familiar phrase for many who remember the early 1990’s”

imove Cornwall is a not-for-profit social enterprise.  imove offers home owners the opportunity to sell their property for a low one-off fixed cost of £399 (no VAT) which will save house owners thousands of pounds.