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Research Project

The UK Housing Market - Factors Influencing the Housing Market: Stamp Duty and Planning

Two other key issues need to be investigated in looking at the future for the housing market. These two issues are:

• Stamp duty
• Planning

Stamp Duty

There have been various benefits to owning a house not least the existence of something called Mortgage Interest Relief at Source (MIRAS). This was a tax benefit to owning a house. In effect what it did was reduce the house owners liability to income tax because the money spent on interest on a mortgage was classified as being free of tax. This made borrowing to buy a house cheaper and contributed to the increase in demand for housing in the eighties and nineties.

Gordon Brown, the Chancellor of the Exchequer, phased out MIRAS during the late 1990s. In addition to this, stamp duty encompassed more people as the Chancellor avoided raising the threshold in line with inflation.

If, for example, a duty of 1% had to be paid on any purchase of a property over £50,000 and the average house price in 1990 was £45,000, there would be a number of people who would not have to pay the duty. If, over the next ten years the average house price increases to £175,000 but the stamp duty threshold stayed the same then many more people would now have to pay the duty.

It is argued that the levels of stamp duty are causing real problems for first time buyers.

Planning

The second big issue is that of planning. Any housing development or major structural change to existing properties requires planning permission from the relevant local authority. The existence of planning permission is designed to regulate the extent of new developments but also to ensure that standards are maintained not only in housing quality but also to ensure that there is some coherence to new development, for example, it might be considered aesthetically damaging to allow a block of flats to be built in the middle of a small village with period properties.

Images: Consideration is being given to planning developments that are in keeping with developing communities as exemplified by the Poundbury development in Dorchester, Dorset on land owned by the Prince of Wales - a far cry from the hopes of those architects who sought to create urban communities in the years after the war through building blocks of flats such as these in Southwark in South London completed in 1959.
Copyright - Poundbury. Crown copyright material is reproduced with the permission of the Controller of HMSO and Queen's Printer for Scotland.
Post-war housing blocks built to create close-knit urban communities. Did they work? © Stardusky, Stock.Xchng

Changing stamp duty and looking at the flexibility of planning regulations are two important factors that could affect both the supply and demand for housing.

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