At first glance, the news that on a street in a wealthy area of North London, there are a series of empty or derelict houses worth an estimated £350m, seems irrelevant to most people. Sure, it’s a chronic waste of land, but since owning such a property is the preserve of the super-rich, they are the only ones who would seem to lose out from them not being on the market. Even if you take the view that it’s a sign of a wider problem of ‘house hoarding’, the impact would still seem to be pretty limited – the average UK house is not generally the target of the multi-millionaire property portfolio owner.
However, the reason that these houses are being held unoccupied for years on end is just as relevant to the first-time buyer as to the foreign oligarch. In recent years, the UK’s house prices have continued to rise to astronomical levels – since last year, they’ve risen nearly 9 per cent. In London, the rise is closer to 12 per cent, and this means that property in the capital is becoming a very desirable investment. The owners don’t even have to renovate the properties to make a profit – because property prices seem to rise in the long-term, the returns on their investment are, quite literally, safe as houses.
By holding onto these houses, and the land which they sit on, the property owners put pressure on the rest of the UK’s housing stock. They stop first-time buyers being able to get onto the property ladder, because as house prices rise, so does the amount you need to borrow from the bank, along with the amount you need to put down as a deposit. If people are priced out of London, they will begin to look elsewhere, including to Oxford, and this puts pressure on rents – rent is already higher here than in most of the rest of the country. More importantly, every house that is occupied by a commuter into London is a house that is not available for students who have to live out, or people who want to settle down in the local community.
So what can be done about it? Boris Johnson’s suggestion that taxes on unoccupied homes is a good idea in theory, but it misses the point. We have a housing crisis in this country, and dealing with foreign house-hoarders is but a drop in the ocean when it comes to solving the problem. Instead, the government needs to take action on a wider level – supporting building firms, or even doing the building itself via the public sector, to ensure that the UK has enough affordable housing.
The major obstacle in the past has been questions about the environmental impact of house-building, especially on flood plains and ‘Green Belt’ land. But to view the situation as a trade-off between house-building and preservation of the environment is wrong – instead, we should find ways to make the two compatible. Making sure that new properties are energy efficient, that there’s sufficient drainage so roads do not become flooded and drains don’t overflow, even spending money on turning previously unsuitable land into areas that can be built on – all are ways of stopping the current housing crisis becoming more serious.
They might seem like drastic and expensive solutions, but without action, a more severe crisis across the country is almost inevitable.
Ed Miliband’s suggestion that developers should face the threat of having their land confiscated if they don’t build on it (‘use it or lose it’) is perhaps a step too far, and unworkable in practice; cooperation with housebuilders is the way forward, and this government, and future governments, must show they are willing to act to solve what is rapidly becoming one of the greatest threats to the economic recovery.