The Joseph Rowntree Foundation has called for urgent and fundamental reform of the housing market to avoid the damaging rollercoaster of ‘boom and bust’.
The JRF issued the plea after the failure of policy-makers to learn the lessons from previous boom and bust cycles, which have led to the UK having one of the most persistently volatile housing markets in the world.
Convened by JRF in 2009 and consisting of interdisciplinary experts, the JRF Housing Market Taskforce has undertaken a system-wide review of the UK’s housing market. Its report recommends a series of policy options that together would help create a more stable housing market, to protect existing home owners and enable more new households to get onto the property ladder.
Recommendations to help reduce house price volatility include an increase in the supply of housing. Supply is central to managing house price volatility. The scale of the increase required, however, means that this alone will not reduce volatility in the market.
Its also highlighted the need for reform of both Stamp Duty and Council Tax. These existing taxation tools could help to reduce house price volatility in the shorter term. Both Stamp Duty and Council Tax should be linked to the real value of a property and regularly updated.
The Foundation wants to see for Council Tax, in the short-term, the number of bands being extended. In the medium term, there should be a move towards a system based on a fixed percentage of a property’s value. In the long-term a national property tax could be created with safeguards for low-income households.
It also wants to see a better safety net for homeowners based on shared responsibility between lenders, borrowers and Government
The current safety net for homeowners is inadequate and has required extensive Government intervention during downturns.
Julia Unwin, Chief Executive of the JRF, said: “Since the 1970s, there have been four boom and bust cycles in the housing market. This persistent instability distorts housing choices, inhibits house-building, and drives arrears and possession rates, putting people at great risk, and creates wealth inequality between the generations.
“We have set out to provide a series of policy options that together would help provide long-term stability in the market. I urge policy-makers to look at these and act now, because the seeds of the next housing boom have already been sown.”