Social landlords should have the right of first refusal to buy homes that come up for sale, according to a new government-commissioned report.
Starts by London housing associations have fallen 92% year on year (picture: Alev Takil/Unsplash)
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The report, commissioned by the former government’s housing department and published by the UCL Institute for Innovation and Public Purpose, recommends that housing associations and councils should then convert the homes to social rent in areas of housing need.
The research examined the underlying mechanisms driving housing costs up across the UK.
It describes a “housing-finance feedback cycle” where increasing financial flows into housing generate rising prices and expectations of future rises, which in turn generate more speculative demand for housing as an investment.
This includes buy-to-let and second homes. Landlords now own one in five homes in the UK and homeownership for younger cohorts is in rapid decline.
To break this cycle, the report makes a series of policy recommendations on how to “discourage speculative demand” and make the housing market more affordable.
In addition to social landlords getting the right of first refusal, this includes “major reforms” of the UK’s planning system to limit the conversion of primary residences into rental units, second homes or short-term lets.
It recommends major reform of the UK property tax system, “abolishing council tax and stamp duty and replacing them with annual property tax on the value of the home”.
The report also recommends compulsory mortgage insurance and longer-term fixed-rate mortgages for first-time buyers, alongside tougher regulations to limit demand for buy-to-let mortgages.
Josh Ryan-Collins, a professor of economics and finance at UCL and author of the report, said: “Over the past 40 years, government policies across a range of areas have favoured housing’s role as a financial asset and investment over the UK population’s actual housing needs.
“This has driven up housing costs dramatically, with younger people shut out of homeownership and facing ever higher rents.
“By implementing the types of recommendations in this report, we can free up potentially vast swathes of the existing stock, much of which is under-occupied, and make a much bigger dent in the housing affordability crisis than will come through the much slower process of new build.”
The report was commissioned by the Conservative administration’s Department for Levelling Up, Housing and Communities.
A spokesperson for the Ministry of Housing, Communities and Local Government said: “We know this country needs more homes, which is why we have set a target of building 1.5 million over this parliament.
“To help us meet this target we’re overhauling the planning system, reinstating mandatory housing targets and creating the biggest growth in social and affordable housebuilding in a generation.”
Recent figures have revealed that starts by London housing associations have fallen 92% year on year, as construction began on just 150 homes in the second quarter of 2024.
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