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I congratulate Chris Philp, one of my near neighbours, on getting the debate. London MPs have a serious job to do on behalf of our constituents. I want to make some suggestions about people’s ability to own their home in London.
A survey in July by the Evening Standard suggested that 82% of Londoners who currently do not own their home believe that it will always be outside their price range. A significant number of those people have good jobs by any estimation and want to buy, but cannot. I think the reason for that is that we have lost the connection—in a moral, civic and party sense—between owning a home and using housing as an investment. That is why, while I fully support the Government in their Budget plan to reduce the tax breaks on buy-to-let mortgages, I do not believe that they go far enough.
The flawed principle that landlords can claim tax relief on mortgage interest will remain. Landlords will get a slightly lower tax relief. The Government’s own documents on that cut suggest that they will save just £665 million a year by 2020. That is just one tenth of the £6 billion in mortgage interest claimed back in tax by landlords in 2012-13. A major contribution to tackling the root causes of the housing crisis seriously would be to get an even playing field between those attempting to get mortgages to buy, and those attempting to get them to let.
To touch on the issue of international investment in property, on which I would not want to compete with the knowledge of Mark Field, it cannot be right that in a major new development in Thameside only a fifth of the properties were purchased by domestic buyers. In July a new £140 million development in Canary Wharf sold out in hours, and half the flats were bought by overseas investors not resident in the UK. A 2013 report by Knight Frank, taking a different tack, found that 28% of central London property buyers were non-UK residents. I challenge the suggestion made by the hon. Member for Croydon South that that is something that happens only in central London.
I represent a suburban London constituency that is cheap by London standards; 18 months ago I had an email from a constituent who said, “Siobhain, you need to know what is going on. My daughter and her boyfriend want to buy their first one-bedroom flat”—in a part of Mitcham that no one would regard as palatial. When they turned up to try to put in an offer, there were 32 people in that one-bedroom flat. The person next to my constituent’s daughter and her boyfriend was a representative of a Chinese bank, which was interest in investing in it. How can that couple ever compete in that environment?
We need to find some solutions. I am sure there are many sophisticated suggestions. One that I want to suggest is a levy on property sold to non-UK residents. It would raise billions in tax revenue and that could be invested in affordable housing. Reducing demand from buy-to-let landlords and foreign property investors would also cut the spiralling housing benefit bill. Housing benefit paid to private landlords has now reached £9.3 billion, or 38% of the total bill. With fewer people able to buy homes, there is more demand in the private rental sector, which again puts up rents. If we removed mortgage tax interest from buy-to-let mortgages, we would release £6 billion. That is roughly the equivalent of grants to housing associations to build 100,000 new social homes—a real contribution to helping those who are having difficulties. We would also help the economy, because as we all know, for every £1 spent on housing construction, an additional £2.09 of economic output is generated.
I urge the Government to be more assertive in their efforts to encourage home ownership through the tax system, and to discourage the damaging crowding of the market by buy-to-let landlords and non-UK residents. We must enable people to fulfil that most basic of human desires—to own their own home—and so we must encourage and incentivise buying to live, and not buying to let.
We are all agents for change in our constituencies. I suggest that Members on both sides of the House look at the YMCA’s Y:Cube, which is about going back to the prefabs. They can be built on bad, difficult, and small sites, and they can be constructed for only 25% of normal construction costs. They can be built within five months of receiving planning permission, and the money is paid back in around 10 years, so it is a great investment. If anybody wants to know more about Y:Cube, I have a pack here, but I am sure that the YMCA would love to talk to them. We need to be broadminded about the solutions and consider things that we may never have thought of in the past, because it is a huge problem.