Question

Five housing policies are described below, based on examples of measures that have been introduced or proposed in the UK, in response to a chronic shortage of affordable houses in many regions.

Drawing on the module material, write an essay that explains, using the ‘demand-and-supply’ model, the likely impact of each policy on the equilibrium quantity and price of houses, and how this might affect the UK’s affordable housing shortage.

• Policy 2

  Landowners will have to pay a tax for plots of building land for which building permission has been granted but no work has been carried out and the plot remains empty. This is to avoid “land banking” – keeping land undeveloped until it acquires more value due to manufactured shortage.

• Policy 3

  The UK government ‘Help to Buy: Equity Loan’ is a scheme that allows buyers of newly built homes to reduce the deposit needed to 5% while keeping mortgage to 75% thanks to a loan by the Government of the remaining 20% of the cost. If buyers stay in their home for at least five years they won’t have to pay any loan fee on the government scheme. The government has also increased the limit of equity loan for London properties to 40% to reflect current property prices.

Answer 1

Answer;

Policy 2

Landowners will have to pay a tax for plots of building land for which building permission has been granted but no work has been carried out and the plot remains empty. This is to avoid “land banking” – keeping land undeveloped until it acquires more value due to manufactured shortage.

• This Will increase land supply for development.
• This will also reduce rice’s for developed housing as land supply is now higher.
• Will reduce the shortage.

Policy 3

The UK government ‘Help to Buy: Equity Loan’ is a scheme that allows buyers of newly built homes to reduce the deposit needed to 5% while keeping mortgage to 75% thanks to a loan by the Government of the remaining 20% of the cost. If buyers stay in their home for at least five years they won’t have to pay any loan fee on the government scheme. The government has also increased the limit of equity loan for London properties to 40% to reflect current property prices.

• This will increase the demand as its effectively increasing the customers' buying power.
• Increased demand increase prices too, resulting no effective change.
• Similarly, buyers need to stay at the same home for 5 years at least to get some more benefits.
• This will result in reduction of second hand houses available in the market.
• Will not affect the shortage much.