Tuesday, January 07, 2014

Getting the property market moving

A lunchtime noodle ...

There is over 220,000 long term vacant properties in the UK along with apparently over 500,000 plots of land with planning permission that remain unfinished. They may have started, the proverbial dig a hole, pour some concrete and get building control to sign it off as a major start but they remain incomplete.

On the one hand we have a housing shortage, low levels of social house building, low levels of construction output, large amounts of land not being completed and still relatively high (though improving) unemployment in those industries whilst on the other hand we have concerns over house price inflation and high profits for building companies. Something isn't quite right here.

We need to fix this but we don't want to burden taxpayers given the time of austerity. Ideally, we want to turn it into a money spinner. So, here's a very rough suggestion.

1) Introduce legislation preventing pension schemes from investing in property, construction or land based funds. Whenever there is a problem, pension schemes often seem to be a likely dumping ground and so we want to protect them.

2) Introduce legislation to redefine any land with planning permission that is uncompleted in three years or any land which could have planning permission but not applied for in six years or any residential property which has less than six months main occupancy in a three year period as derelict. The period of time should not take into consideration whether the land has changed ownership through private sale or public auction.

3) Any land which is defined as derelict should be put up for compulsory government auction with no minimum price. The proceeds of which should go to the original owner minus a 40% administration fee  of the selling price payable to the Government for running the auction. Yes, the Government should run the auction and take a hefty cut and yes, the Government should also be able to bid. Any land which is unsold is valued at £0 and immediately purchased by Government. Any land which is sold through the Government auction should have the planning permission reset to the date of sale and the clock should start ticking again. 

4) Create a building fund from direct investment, unsold properties and from proceeds of the government auction for the purchasing of land for future social housing. 

5) Create a government owned national building company ideally through nationalisation of an existing building company after pressure has been applied to reduce its value i.e. encouraging short selling, any other dirty tricks you can think of etc. Allow the national building company free access to the building fund, invest in its growth through hiring and training and compete on the open market with an emphasis on social housing.

6) Allow and encourage local authorities to build up social housing through the national building company.

7) Make a declaration that the Government will consider privatising the national building company once four million new houses including at least one million social houses have been built or brought back into circulation in the marketplace.

8) Introduce a land value tax as an additional means of raising revenue.

Now, I'm certainly not saying you should the run the scheme exactly as I've written it above but what I want to point out is that the Government really needs to become a bit of a pirate here. The market is clearly not working as it should and we shouldn't be soft touches about dealing with the problem. In a time of austerity the Government needs to be a ruthless operator. I'm also not convinced by the compulsory purchase ideas that abound and I'm far more in favour of compulsory auctions with the Government taking a hefty cut in administration fees. But mostly I'm convinced by giving the building industry a kick up the backside and so simply threatening to do this is probably enough if it gets the results.

... whilst we're at is, can we please finally change the House of Lords to a House of Representatives selected by random from the electoral register to serve for a period of five to ten years.