Home economics

Think tank: Social Market Foundation

Author(s): Gideon Salutin

March 19, 2024

This report from UK think tank the Social Market Foundation discusses financial policies to increase homeownership.

Homeownership is a dream for millions in countries across the Anglosphere, but rising prices have put that dream out of reach for many households. This Social Market Foundation report – the second in a series on the problem of housing – surveys homeownership challenges and policies in the UK, Australia, New Zealand, Canada and Ireland to understand what has gone wrong and how we might fix it.

The report recommends alternative policies, focusing on the three main obstacles facing first time buyers: deposits, mortgage payments and tax payments. The average deposit demanded for home purchases in the UK has risen from £16,400 in 2007 to £50,051 today. To address this, the UK should learn from Canada’s system of mortgage insurance to allow for cheaper deposits.

Although the burden of monthly mortgage payments declined from 2010 to 2020, British homeowners are more vulnerable than their international peers to interest rate rises. To address this, the UK should allow lenders to offer longer term fixed-rate mortgages by altering affordability requirements and encouraging demand.

The UK has the highest home taxes in the Anglosphere as a proportion of GDP, and the burden as a proportion of income is higher for lower income households. To address this, half of private tenants’ council tax payments should be directed into a home deposit savings account and stamp duty should be abolished. ‘Housing sin taxes’ such as taxes on foreign buyers, vacant homes and house flipping should be introduced to make up the shortfall in revenue.