Stamp duty cut won't solve housing crisis especially lack of supply of low cost homes, and subsidises second home buyers. 70% of new houses come from onl 10 developers

July 18, 2020 5:31 PM

It is estimated that there could be 100,000 extra house sales in the next nine months. Liberal Democrats peer , Lord Shipley, speaking in the House of Lords, said "I accept the importance of that in reviving the housing market. When people move homes, they generate sales of fittings and materials for those new homes, which is an additional benefit. But I hope the scheme to cut stamp duty will not be extended in its current form after 31 March next year and that the opportunity is taken to learn from the experience of the next few months. There are two reasons for saying this.

"First, it will not solve the housing crisis, which is primarily about a lack of supply, particularly of low-cost housing for those on lower incomes. There is a real risk that this change will just lead to more competitive bidding and sale prices higher than they would have been. I ask the Minister specifically why the Government have included second homes in this policy change. It seems a very strange subsidy, albeit a temporary one, even though the 3% additional homes levy still applies. Why have the Government included second homes, when buying a second home reduces opportunities for local first-time buyers?

"This new policy will not help those who cannot afford to buy a house in the first place, nor will it help many first-time buyers get a mortgage, since banks and building societies want a 15% deposit. There is an additional danger that buy-to-let landlords will outbid first-time buyers and push up prices. There are 9 million people on furlough, who could find it hard to move anyway. What assessment have the Government made of the fact that many households will not be able to take advantage of the reduction in stamp duty anyway? The supply of low-cost homes for sale and rent to low-income earners really matters, and I see nothing in this proposal that will address that."

The Government should look again at two related issues. The first is the question of who benefits from increasing land values, which can result from planning permission, and how that financial gain could be used differently for the support of more low-cost housing. Secondly, why does 70% of new housing supply lie with only 10 developers, and what might be done to broaden the number of builders and thereby increase supply?