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Reining in house Prices and Rents and influencing the House Price Mechanism without taking money away from people through interest rate rises and stamp duty

A discussion document by Bob Goodall

Coordinator of the Campaign to regulate House Prices and Rents

27.3.07 The rising Income and House price paradox; how more can turn into less                                                                                  

Many news stories and commentators are now reporting how it is almost impossible to buy a home without help from inherited money, larger mortgages, or by joining with others to buy a property which are unfortunately all factors that also have the negative effect of increasing the buying power in the market chasing the limited supply of housing, and this pushes prices up even more, thereby reducing the real benefits of this extra income available to purchase a property, wherever it comes from. Hence  ‘more really does become less’.

Although this document may seem a bit long, I hope it might be of interest. Essentially it looks at an an approach which might be used to tame house prices but without the usual recourse to taking money away from people through interest rates rises or through the effects of stamp duty.

Our campaign www.housepricecontrol.org.uk have put forward what we believe to be some positive and workable ways of reining in house prices and rents through and wonder if you might be able to take a look at some of the suggestions we have made.

Housing ie Land is limited in supply and therefore the price is set by the same supply and demand factors as with any commodity.   

May I ask if you might be able to have a look at the following  when you have time, at the case we try to make that  various forms of creative direct, or indirect regulation could help keep down house prices by influencing the supply and demand factors that relentlessly drive prices upwards?

I have a background working in social housing and now campaign against the soaring costs of house prices and rents. Prior to that I coordinated the Save Our Building Societies campaign, in which I came across an interesting dilemma. Although mutuals were able to offer lower cost mortgages to their customers the resulting increase in buying power could help push up house prices even more, so that some of the advantages gained by cheaper borrowing might be lost.

I have a strong interest in Economics though I have to admit I did turn down the chance to study it further and went to Art college instead, which seemed to hold more interest for me at the time!

 Nevertheless I hope the argument I’m trying to make for regulation as applied to the housing market and the way prices are set might hold some merit. Perhaps it might mean that my ideas are necessarily a little more creative and a little less mainstream than they might otherwise be, but I believe they could work and that direct and indirect regulation be used to rein in soaring house prices and rents.

I tried to use the recent EU ‘possible ban on ordinary light bulbs’ story as a hook for a possible story on how regulation, or ‘enforced guidelines’ or the gentle turn on the tiller by central Government can be helpful, just as too much of it can be the opposite. And to try to get the media to debate how it can sometimes be a more effective alternative to the traditional remedies employed by Government to overcome a problem,

And then just perhaps, whether such an approach might be applicable to the housing situation?


I hope the following might be of interest

News briefing 9.3.07

The EU announced the possibility of a  ban on ordinary light bulbs to save energy by directly regulating consumer behaviour. A similar story was reported from Australia on 21st February this year. Could we not learn from this? and from the raft of existing levers that are already widely used across our society to regulate whole areas of our lives, and from which we benefit greatly, including direct intervention in different ways to help moderate the price charged for a product or service, where the supply is limited, and is exceeded by demand.

This is surely the case with housing, where demand exceeds supply, house price inflation exceeds most people’s increases in salaries, and for some such in the public sector who are virtually taking pay cuts, the situation is becoming almost impossible -I nearly wrote unbearable.

A higher percentage of salaries than ever before is now needed to pay for a home. This is cutting deep into our standard of living; in fact we seem to be paying even more for homes that are perhaps smaller in size than before. Who gains from this? Isn’t it a case of the Emperors clothes, and should not someone be brave enough to say at last that house price inflation is not a good sign indicating rising prosperity in the nation, but is the reverse and in fact is downright harmful and severely reduces  our ‘real’ standard of living. A million pound house is not any bigger than when it was perhaps bought for far less.

A house is primarily a home not an investment contrary to what some would suggest, and in the same way that most accept that the market must be regulated elsewhere where supply is limited, and exceeded by demand and where the price mechanism would otherwise work against the consumer, should we not at least start to consider whether the same situation might apply in housing and if so whether there might be other measures, apart from resorting to the same regimented tramline response of higher interest rates or changes in stamp duty.  

Might there just be another way to ease this situation? 

I campaign for action against house price inflation because of the harm it does to our community and the way it blights so many people’s lives.

Although it might seem at first glance that today’s move by the EU could not possibly have any bearing on how we might reduce house price inflation, or deal with a number of other issues facing the government without resorting to the more traditional  tax or spend remedies I wonder if the following might change your mind? 

News, Friday 9th March 2007 -

A European Union plan announced today involves:

  • A possible ban on filament light bulbs in offices, street lights and private homes by the end of the decade

EU officials are working on a directive that would compel the use of modern low-energy fluorescent light bulbs. It could come into force as early as next year.  

Campaign for House Price Regulation


Our campaign would like people to think more about the potential of regulation to influence consumer behaviour and improve our standard of living, rather than taxation or changes in interest rates.


In Australia a simple regulation by the Prime Minister will in an instance save electricity and resources 

  • Similarly we might consider banning Trans fats and take more of interest in how fast food is prepared and cooked, rather than banning the likes of McDonalds if such a thing was ever suggested.
  • The Government might give a real boost to our creative industries and our ingenuity if it said to companies that for next Christmas there might be limitations on the packaging that is used, ie by quantity or type (recyclable). If all companies are put on a level playing field as their competitors they might be agreeable to such a standard. As it stands a company might decide that it is commercially worthwhile to substantially wrap a product for example where a product is expensive to manufacture but looks insignificant because perhaps it is small in size (an increasing feature of many products?) Perhaps affecting the perception of its value by consumers and hence influencing the price they are prepared to pay for it. Or use a lot of packaging on any product where by doing this it can be sold for a far higher price.

To rein in house prices the Government currently resorts to tools such as raising the interest rate –-which also affects industry, and perhaps has more of an effect on the less well off than the rich, or may have a devastating effect on those just managing to pay the mortgage, who may even end up losing their home because the interest rate has gone up.  The Government may also employ stamp duty to influence the market.  

What I have in mind is not about taking money away from people- 

May I run 2 ideas past you that might help people where the Government might use other measures apart from interest rates or stamp duty to rein in prices. They involve regulation, and it has being suggested to me that I might make more headway with this campaign if I dropped the term ‘regulation’ from its title. But I’m a bit obstinate and want to say what is on the tin. 

Regulation is not about taking money away from people. In any case the Government already do this in the form of death duties and when people are required to sell their homes to pay for nursing case. And the first at least fall more heavily on those least equipped to seek or pay for advice to avoid it. 

Regulation is about slowing the relentless rate of increase in the price of houses, not about taking money away from anyone, or cutting house prices. It is about reducing potential house price increases in the future and is not about, and has never being about acting retrospectively on the market. 

2 ideas 

1)     An example of direct regulation would be to re-introduce rent controls of the type seen up to 1989.

This might mean that renting property might once again become a viable option for people seeking a home, rather than being seen as a waste of money. This might lead to a reduction in demand for housing and hence prices. People might wait longer before seeking to buy a house, as they would have a viable alternative and when finally deciding to buy a house might be in a better position to afford it. This might be linked to reintroducing the curbs such as 3 times income, so that people live comfortably within their incomes again. This is a safeguard for borrowers which seems to have being dropped by some lenders. 

Since 1989 the housing benefit bill has risen 4 fold to £12billion so rent controls might also save a lot of public expenditure which could be used elsewhere.

2)     Second home ownership reduces the number of homes available to first time buyers. In regions such as Cornwall at one point 80% of house sales were to people outside the county, making life impossible for local people wanting to buy a home, particularly as local wage levels could not compete with those for example paid in the south east. 

People might consider using hotels again rather than buying a second home for occasional use. 

One way to reduce the demand for second homes might be to allow local authorities the right to set very high council taxes for second properties. 

High council taxes on second properties to reduce demand and hence prices  would be an example of how indirect regulation could rein in house price inflation. 

We should move to a situation where all people would be given some assistance if necessary to find a home. There are various ways this can be done and I would be delighted to run them past you if you have time .Some are on our website. I believe this can be done. 

This would have wider social consequences. For example single women for example might for example find a home without needing something like pregnancy to come within the statutory guidelines for help, so perhaps in some cases this really important life choice might be made at a time when they more wanted or felt more ready for it?


The Joseph Rowntree gave a presentation in 1996 which suggested an overall saving could be made in government expenditure by reducing the housing benefit bill, if the Government reverted to 100% start up grants for social housing schemes. It has dropped to 50-60% to save money.  

 This can also be used as an example of wider debate where by spending more initially the Government can save money later as well as making it easier for people to work and not rely on benefits) 

  • Land is limited in supply. We prefer to limit development through the green belt and planning laws to protect our country from resembling the urban sprawl say of Japan. However this example of regulation in the housing market, although laudable further restricts supply hence prices are pushed up.

We need to also consider other factors. Not all people’s salary levels are the same and we need a wide range of people to make our society function. We seem to have adopted an ostrich like position in terms of how large numbers of people are expected to find a home. What are shop workers and people on the minimum wage meant to do? 

Some other facts as I see them 

  • The term key worker is an anachronism. I worked at one housing organisation administering a key worker scheme where one employee said –what about us?!! Many different types of people are needed to make a community work. Who pays the taxes that pays the salaries of the sort of people usually suggested as key workers ie ‘nurses’ ‘teachers’ –the money is paid by ordinary people from shop workers to office workers who also help keep our community functioning and they need help finding a home too! Many may also be paid far less than those termed as key workers.
  • People living in areas with expensive areas will be the first to feel the effect of rampant house price inflation when people doing the basic jobs in their community are forced to leave the area to find a place to live themselves.
  • Other parts of social policy unwrap as the elderly need to turn to the state to be looked after when they might not have needed to in the past-the destructive effects of house price inflation on our social fabric may have changed this where for example the children who might have helped their aged parents before may now have to move away to other parts of the country to afford a home themselves.

Can Building societies and efficient financial organisations help?

Some financial organisations because of their structure, or the hard work and efficiency of their staff may be able to provide lower cost mortgages to borrowers, or increasingly both partners may go out to work, but the financial advantages gained from this can be lost or heavily reduced because this extra buying power chasing a limited resource serves to push house prices up even more. Financial organisations or individuals have no control over, or cannot regulate a market and the way the price is set, nor should they be able to, but this is something our elected government could seek to influence. They have it within their gift to do far more to rein in house prices and rents than they are doing at present.

Expensive homes are illusory wealth? 

  • The idea that you are necessarily wealthy if you own an expensive house; is in reality, illusory wealth? You may in many ways and by various indicators be actually be less well off than you think you are.

Ie in terms of social factors such as the quality of local services, possible shortages of key workers and proximity of family members and friends and financial factors such as higher insurance and council tax bills and higher costs for essential services and people needed to maintain the property ie plumbers. The costs of day to day requirements  such as food and perhaps public transport may also be higher, if in the latter case, they are available at all. 

With buses as one example, some elderly people for example may live in expensive areas where many residents, perhaps the younger people who have recently moved in either have an alternative in terms of their own transport or do not need a local bus service at all, and this reduction in demand combined with a shortage of people to drive the vehicles (or if people can be found, they may need to be paid more than in low cost areas), can make running a local service less viable.

If labour is brought in from abroad, these workers may themselves attempt to move to cheaper housing areas as soon as they can, to afford a home, so this strategy to meet labour shortages caused by high house prices may only in fact be a stop gap.

That the capital in the house is only released on the sale of the property, and because of the way  the house price bubble has engulfed our nation that this is now even difficult to do by moving to another part of the country, even if you wanted to move away from family and friends to do so. Prices have increased everywhere, and there is less house price differential by region than in the past.   

The increase in second home ownership, the increasing potential of new technology to allow people to work from previously remote areas and the interest in investing in property are some reasons that have helped increase prices faster in previously low cost areas relative to the more expensive parts of the country, thereby flattening the market. 

  • And moving aboard, if that is seen as an option, is starting to upset local people. I think in certain cases buying overseas is unethical .In certain areas like Brittany the local people are literally fighting back.

Other effects of rising house prices

  • Rising house prices increase the cost of living and hence has a bearing on wages, People may be  paid more than ever before but this does not translate into higher standards of living as the money is gobbled up by rising house prices. House price regulation would I believe significantly ratchet up the real standard of living of the people of this country

The catch-22 increasing income/ higher housing costs curve and how this could be reversed.

The cost of housing affects the wages we need to earn to afford a home, but also affects the price of every good and service we purchase by affecting the wages paid to those making the product or providing the service.  So that house price inflation may have a far wider effect in increasing costs and reducing our standard of living than we realise.

 If the percentage of income needed  to pay for a home perhaps returned to earlier levels, we could enjoy a  higher  standard of living relative  to the salary we earn or expect to earn.  

We might even achieve a situation where we could afford to take  lower pay increases than before  helping our industry compete more effectively by  price  across the world but by regulating our  most basic necessity housing -so that this takes up increasingly less of  our income as a percentage , we could actually become increasingly better off with falling increases in income. A captain of industry’s dream! 

At the moment we have a catch22 situation. The more we earn the harder it is becoming to increase our standard of living as this increase in income  is not only used to meet increasing housing costs but drives prices  up even more! Regulating the price of housing could be how we reverse this paradox.  

  • Jobs can be driven overseas where wages are lower because the cost of living is lower. A significant factor behind the lower cost of living in other countries are lower house prices. China is now seeing house price inflation, and this may have a bearing on the increase in the cost of their products. There have been calls in China for the control of house prices

A recent news report featured concerns of people in Sri Lanka losing their jobs to India and China. It would be interesting to compare the price of housing in these countries and the UK with the export or retention of jobs.  

  • If we make savings in other parts of our economy; for example the price we now pay for food has dropped, this can lead to more money becoming available for paying for a home, hence increasing the buying power available in purchasing a home. This means that this cost saving in the economy is lost as the market adjusts to the resulting increase in income available to chase the limited resource of housing, and house prices go up.

We gain with one hand and lose with the other as increases in efficiency, productivity or cost savings in our economy are snatched away by the untamed house price mechanism driven by demand over supply. This is a regular and repeatedly seen feature of the way the house price mechanism frustrates our efforts to increase our standard of living. 

  • People are spending a higher percentage of their income before on housing but there may also be sections of the community who have now being left behind completely and now have no hope of getting on the first rung of the housing ladder. What are they to do? What incentive does this offer them for working for the future if the housing market has being made impossible for them and there is nothing they can do about it?
  • Some people are putting off until much later to have children, if at all so there is quite a major social consequence here.

Many of the current initiatives to help people buy homes such as people clubbing together to pay a mortgage, or parents paying their children’s mortgages have the effect of increasing buying power chasing the limited supply of housing and hence will push up prices. 

There seems to be a real concern about what will happen when this unwieldy pyramid falters. There is an urgency verging on desperation to maintain the number of first time buyers entering the market to maintain the level of the market, but the number of first time buyers starting to fall. 

Finally in response to those who feel the idea of regulating the market puts people off the idea. This may in the end happen but the way it happens may be that policy makers will do it but do not refer to the ‘R’ word - regulation as they do it. 

I have written to Michael Meacher about his property portfolio suggesting he might consider selling his 9+ homes in recognition of how second home ownership helps drive up house prices and makes it harder for first-time buyers, and to suggest that if he were to set an example to the nation by doing this, he might also give a huge boost to his campaign for leadership of the labour party. While resolving some of unanswered questions about why he owns so many homes when he has already acknowledged the harm caused by multiple home ownership, and to show where his priorities would lie if he became leader. 

His office acknowledged receipt of my email to him but so far he hasn’t replied. 

Briefing Note: Housing & regulation 

May 2006

The media seem awash with programmes about making money out of property and the Government is to introduce measures that will further inflate house price inflation and encourage ownership of second homes. Local people particularly in areas like Yorkshire find it nigh on impossible to purchase a first home.


"housing costs are directly linked to costs to industry as people have to earn more if the cost of living rises, making UK industry less competitive."  

Society needs people to variety of jobs, many of whom are vital but relatively poorly paid. Such people cannot compete in an unregulated housing market against people from outside who may be in much higher paid (though not necessarily as useful) jobs. 

"Indirect measure might include higher council taxes for second properties which would reduce demand, increasing the supply of houses which would lead to a fall in prices.  

We might consider the ethics of owning a second home and perhaps in time the case could be made for a ban on owning more than one property."

 Regulation as a free fiscal tool available to Government: 23.2.06 

Background to the use of Regulation to help our communities 

A couple of months ago the news featured story on house prices and a Devon village where the actions of the villagers to restrict purchase and re-purchase of the affordable homes to local people is perhaps an act of regulation, which is a free fiscal tool available to government.

And I think the Exmoor National Park is considering something similar. 

On a wider scale regulation might be the way to control skyrocketing house price inflation. Direct regulation on house prices might be difficult to introduce (although it could be reintroduced in the rental market where it existed up to 1989) but indirect levers on house prices might be more acceptable and could used to cool the market.

And I feel in light of recent government proposals to encourage investment in property as part of pension provision it might be topical to not only warn of the disadvantages of this but also of the great benefits our economy and society would get from cooling the market through some form of regulation, direct and indirect.  

The media has been running with the housing market recently. One featured calls for an interest rate cut to stimulate the housing market and mentioned the controversial self-invested personal pension scheme that would see residential properties been used as part of pension provision.  

I think this is a huge mistake not so much because of the lost revenue to the Exchequer but because it will further inflate the housing market and housing costs are directly linked to costs to industry as people have to earn more if the cost of living rises, making UK industry less competitive. Essentially countries overseas are increasingly able to undercut us because their cost of living is much lower. And the biggest cost to anyone is the cost of providing a home. 

Far from boosting house prices the government should be trying to bring them under control. House price inflation harms our economy and UK industry as well as harming the social fabric of our communities.

Peoples pension funds would be boosted by a rising stock market and this could be achieved by radically reining in house costs not the reverse. It seems the government is pushing things the other way. Also if people were able to spend less on housing it would boost consumer spending.

Eventually whatever any government does the whole pyramid like structure of over inflated house prices will come crashing down ie they will run out of ideas or money to sustain it although perhaps it will not occur on their watch.

It would also be helpful for our economy and people’s pensions for the government to encourage people to invest in industry not offer them attractive short-term alternatives speculating in housing.

Regulation is both an overused and underused free fiscal tool that the government has. Overused and in some cases there is too much red tape. Various forms of token monitoring required by government departments sometimes achieves less than it should and can waste a lot of time while providing a misleading fig leaf of respectability, suggesting sometimes consumers are content with something or are listened to when in fact  in reality they may not be and bad practice may be present 

 (ie an example of this in housing may be the numerous so-called tenant participation initiatives in social housing which give perhaps the illusion of a close working and inclusive relationsip between tenants and social housing departments, when in fact this might not be the case) . Another example can be badly designed report forms which police have to complete and which can require hours to fill in, thereby taking many police officers off the streets, (where perhaps these forms need to be streamlined to achieve what is required with less time).  

So any regulation can carry a cost. It needs to be well designed and carefully thought out.  

However there is an ingenuity about regulation that in some cases can bring great benefits to the community 

 Regulation already abounds, regulating the quality of food sold as just one example has made the nation much healthier. It does not carry a financial cost to government which I see as one of its strengths. Governments do not have to own the factors of production but they can regulate them. 

Just a few examples of potential regulation to illustrate the point might be for example around the issue of improving the protection of the environment.  

If the government regulated the amount of packaging a product could have, companies in theory would be happy because they would be on the same level playing field as their competitors. (Industry would need given a reasonable lead in to such changes). They would invest more in their design teams to produce attractive packaging based more on good design and ideas rather than sheer mass of packaging material. This would save raw materials and save on disposal and landfills later down the line.  

Another example might be recycling paper. There is some resistance to using it because recycled paper can appear to be a bit muddy and less attractive to consumers. Say however the government regulated that new printing dyes needed to be used that were easier to wash out this would lead to cleaner recycled paper which would be more attractive.  

Or if a 30year old idea was brought back that plastic containers had to bio-degrade in time ie in sunlight then this would also help our environment. 

The whole concept of how regulation could help the world might be something that could fire readers imaginations. I’m sure the ideas are out there and they could really develop and extend the concept and its application in their own areas of life and expertise.  

Regulation is as old as the hills and can in this case I believe help tackle house price inflation that is slowly strangling our communities and our economy.  

There are a lot of vested interests who will cry foul but in light of the new government proposals to further inflate the housing market perhaps it is now time for an alternative scenario for the future direction of the housing market price-wise to be mooted. 

I hope this is of interest