How to beat the UK housing Crisis

Today, Gordon Brown, our lovely new Prime Minister, let Parliament know his ideas and priorities for the coming term of office. Top of the agenda was housing. For those of you that don't know, the UK has a housing crisis. Even flats the size of shoe boxes sell for 6 times the average salary and many core workers can't afford to get on the housing market.

Firstly, let's look at the tried and tested (and failed) remedy that Gordon Brown is set on retesting. Conventional wisdom states that If demand outstrips supply, prices will rise and if supply outstrips demand, prices will fall. Therefore, by building more houses we can bring house prices back under control.

Conventional wisdom falls flat on its face here. The above rule might be true if you are selling hairbrushes but it is not helpful when it comes to housing. Space in the UK is at a premium, it is a very finite resource. Although the basic capitalist principal of supply and demand works on paper when you apply it to the real world it comes unstuck.

• We don't have space to build new houses
• No one likes new housing developments or wants one built near them
• We can't actually build new houses at a rate that would make a significant difference to the housing market
• Architects in this age are incapable of building anything nice

So, the supply and demand trick won't work, what will work? Firstly we need to establish a basic fact:

• We don't have a shortage of housing in the UK

The shortage of housing in the UK is often highlighted by the media as a stark truth. It is not. There are many houses in this country which are suitable to become permanent homes, but for the following reasons this is not happening.

1. The MOD owns many houses and areas with redevelopment potential which are being left idle.
2. Many non-UK residents own houses. Especially rich Saudis and Russians with property in London and the Home Counties.
3. Many people own second, third, tenth, twentieth houses.
4. There are parts of the UK where no one wants to live due to lack of infrastructure, lack of employment, and poor social standards.

In truth the biggest problem is number 3 above. The supply and demand principal has lead people to believe that housing investment is a no lose situation. They are probably right as the current laws stand. The housing market may settle down or even drop a little, but the general long term trend will be up.

These greedy few who won't work and or invest their money in something worthwhile, like a new business venture that might provide employment and prosperity for all, are causing the UK a lot of problems. So, what's the answer?

Well, it is painfully simple. We need to prevent the buying and selling of houses from being so lucrative. One way of doing this is to tax not the house sale itself, as in stamp duty, but to heavily tax the profits made. A similar system works in France and house prices are remaining more stable. However it is important to limit outside non-resident housing purchases. Some second home ownership is useful, such as holiday or student renting. But this must be profitable only in the rental sense, not as an investment in itself.

That way the housing market can cool, and people will be able to buy a place to live while doing an honest job.