5
Breaking the Housing–Finance Feedback Cycle
5.1 Introduction
Today, governments are becoming seriously concerned about housing affordability. However, the identification of the cause of rising house prices focuses on the supply side, reflecting mainstream economic theory and its neglect of the unique and contrasting properties of land and credit. Politicians of both Left and Right of the political spectrum are guilty of this. Typically, progressives advocate building more homes with little consideration of the fact that desirable location (typically in large cities) is inherently limited. Meanwhile, free-market liberals and economists claim that all will be solved if planning rules can be liberalized, neglecting the fact that planning rules are themselves an outcome of land’s scarcity and people’s almost limitless desire to live in attractive places.
This is not to say that sensible changes to planning laws or more investment in good quality, affordable housing in the right places would make no difference to house prices. But the fundamental driver of high house prices in advanced economies comes from excessive speculative demand, not a lack of supply.
To recap, housing can serve two economic functions. It is both a consumption good, providing us with shelter, proximity to work, a place to raise a family. But equally and increasingly it serves another function: a financial asset. A financial asset that can provide increases in paper wealth far in excess of other forms of asset such as savings, shares and, in particular, government bonds. This has been particularly noticeable in the last decades, but in fact property has been the best form of investment going back 130 years in advanced economies, averaging the same 7% annual return as equities but being far less volatile.1 And importantly, in Anglo-Saxon liberal market economies, home ownership has enabled households to borrow against the rising value of their property, propping up consumption as wages have stagnated.
This wider role of housing and land as a means of boosting consumption is one reason that politicians have been reluctant to address demand-side issues and the housing–finance feedback cycle. Added to this is the problem that the banking sector’s health has become increasingly intertwined with house prices as mortgage debt has become the key asset on their balance sheets. Falling house prices will lead to falling collateral values relative to outstanding debts, leading banks to contract even further their lending to businesses. And, finally, there is the simple political fact that the majority of the voting population in advanced economies are themselves home owners. And their homes make up by far their largest source of wealth.
Despite this gloomy prognosis, there are reasons to be hopeful. Falling home ownership is creating a new constituency of voters demanding a better deal from governments, in particular amongst younger swathes of the population. London, for example, has just recently became a majority renting city. And, although the general pattern of increasing mortgage debt and house prices is common across many advanced economies, there are some important exceptions. Economically successful advanced economies such as Germany, Austria, Japan, South Korea and Singapore have actually seen average house prices falling relative to incomes since the 1990s, as shown in figure 5.1.
Figure 5.1. House price-to-income ratios in Germany, Japan, Korea and Anglo-Saxon economies indexed to long-term average (100), 1995–2016
Source: OECD Analytical house price database.
These economies share some similar characteristics, in particular in the way they govern the land market, tenure policies and their respective banking systems. This chapter draws on these cases to examine how we might break the housing–finance cycle by looking at three main areas of reform: financial reform, tax reform and changes to the usage and ownership of land.
5.2 Banking and credit for public purpose
Perhaps the key challenge in breaking the housing–finance feedback cycle is weaning banks off mortgage finance. This is more than just a minor ‘market failure’; it is a systemic bias that requires systemic intervention. A number of options present themselves: changes to financial regulation to incentivize non-property-related lending by banks; structural changes to the ownership and function of the banking sector to support business lending over property lending; or simply preventing commercial banks from engaging in credit creation for property purchase and turning to other forms of property financing.
Rather than focusing purely on the price of credit (interest rates), policy makers should consider regulating the quantity and allocation of credit for different purposes. During their history, almost all central banks have employed forms of formal and informal quantity-based credit regulation under various terms including ‘credit controls’, ‘the direction of credit’, ‘credit guidance’, ‘the framing of credit’, ‘window guidance’ or ‘moral suasion’.2
Credit controls were particular effective in East Asian economies. They were adopted by the Japanese, Korean and Taiwanese central banks in the early 1940s during World War II and in the decades that followed.3 Called ‘window guidance’ in these countries, the central bank determined a desired rate of nominal GDP growth, calculated the necessary amount of credit to achieve this and then allocated this lending across both various types of banks – many of which were publicly owned – and industrial sectors.
Credit for the purchase of land and property was suppressed under these regimes as it was seen to produce excessive asset price inflation and subsequent banking crises. Most bank credit was allocated to productive use, either investment in plant and equipment to produce more goods, investment to offer more services, or other forms of investment that enhanced productivity (such as the implementation of new technologies, processes, and know-how) – and often a combination of these.4 East Asia famously enjoyed one of the fastest periods of sustained economic growth during the period when these credit controls were in place. There were no major credit bubbles in the housing sector.
Domestic regulations of this type would be considerably more effective if they were complemented by supportive international regulation. International regulators, including the BIS and the IMF, need to reverse the strong favouritism shown towards property lending in terms of capital and liquidity requirements for the banking sector. Regulations should support banks that are able to de-risk their loans via methods other than landbased collateral, most obviously via the building up of long-term relationships with non-financial businesses, as discussed in the next section. And finally, there is a strong case that all but the simplest forms of asset-backed securitization should be prohibited.
Structural reforms to the banking sector
There may be limits to what regulation can achieve on its own given how entrenched mortgage assets have become on modern banks’ balance sheets. In addition, the highly competitive and globalized nature of banking and capital flows today makes regulation easier to ‘game’. Countries might have to re-impose foreign exchange and capital controls to prevent foreign banks and shadow banking structures from getting around domestic rules. Structural reforms may then be more effective.
A range of studies suggests that bank-lending behaviour is strongly influenced by ownership type, size and other institutional factors. Since the 1990s, advanced economy banking systems have become less diverse as financial deregulation led to waves of mergers and acquisitions, not least following financial crises. Large, universal shareholder banks that combine investment and retail banking functions have become the dominant model in Anglo-Saxon economies. Specialist mortgage banks – the savings and loans and building societies discussed in earlier chapters – have demutualized or been absorbed into larger universal banks.
Shareholder banks operate a ‘transaction’ banking model5 characterized by a preference for centralized and automated credit-scoring techniques to make loan decisions, a need for high quarterly returns on equity, and a strong preference for collateral. Increasingly, the model favours the generation of profits through the securitization and selling on of loans, with the most popular type of securitized loan being RMBS. The imperatives of short-term shareholder value both incentivize excessive risk-taking and mean that lending to SMEs – involving high transaction costs for relatively small loans – does not make business sense for larger banks.6
By contrast, in other countries, for example Germany, Switzerland and Austria, there is a much stronger culture of ‘relationship banking’. In Germany, two-thirds of bank deposits are controlled by either cooperative or public savings banks, most of which are owned by regional or local citizens or their representatives and/or businesses. These ‘stakeholder banks’ are more focused on business lending, do not have such stringent collateral requirements and devolve decision-making to branches.7 They de-risk their loans not by requiring property as collateral but by building up strong and long-lasting relationships and an understanding of the businesses they lend to. Although the general pattern in advanced economies has been a shift towards mortgage lending, in Germany lending to non-financial businesses is significantly higher than mortgage lending, at 40% of GDP, whilst mortgage lending has only increased to around 30% of GDP (figure 5.2).8 This stands in marked contrast to the advanced economy average of 70% mortgage credit and 50% non-mortgage (figure 3.1).
Empirical studies find that ‘stakeholder’ banks, including public savings banks and cooperative banks, maintain their lending – both mortgage and non-mortgage – in the face of financial shocks (e.g. changes in interest rates) in contrast to shareholder banks which are much more pro-cyclical.9 This is unsurprising if their models of lending are based on relationships rather than collateral values. A bank with a long and strong relationship with a firm is much more likely to have the confidence to see it through the bad times. Evidence suggests that the general shift towards shareholder banking models and away from stakeholder banks that occurred in 2000s was a contributor to the financial crisis.10
Figure 5.2. Bank credit allocation in Germany and real house prices, 1968–2013 (credit stocks to GDP)
Source: D. Bezemer, A. Samarina and L. Zhang, ‘The shift in bank credit allocation: new data and new findings’. DNB Working Papers 559, Netherlands Central Bank, Research Department (2017).
State-directed finance and state investment banks
Encouraging the growth of stakeholder banks and relationship lending may take considerable time, in particular in economies where they lack the economies of scale to compete effectively with incumbent shareholder banks. A complementary and more direct way of supporting non-collateralized lending to support productive activity, innovation and priority infrastructure (including affordable housing) would be the creation or scaling up of existing state investment banks (SIBs) (also known as ‘development banks’ or ‘public banks’). These institutions are government-owned or -funded financial institutions concerned primarily with the provision of strategic and long-term finance to industry.11
Development banks are recognized as having played a crucial role in the rapid industrialization process of continental Europe in the nineteenth century, providing the patient capital necessary to build railroads and canals across the continent and in the process revolutionizing capitalist production. One of the largest examples from the nineteenth century was the French Crédit Mobilier bank, founded in 1852 by followers of the French socialist thinker and reformer Henri de Saint-Simon. Its name is revealing. In contrast to the common mortgage bank (Sociétés du Crédit Foncier) or ‘land banks’, which lent money on the security of immovable property, the Crédit Mobilier aimed to lend to the owners of movable property and so to promote industrial enterprise.12 The bank funded transport infrastructure in France via low-interest long-term equity investment and bond finance, rather than the short-term higher interest lending provided by French family banks.13 The Crédit Mobilier also enabled the development of railroads across the rest of Europe by supporting other continental development banks, via share ownership and the provision of engineers and expert knowledge.14
State-sponsored banks were also key to rebuilding Western and East Asian economies in the aftermath of the Great Depression and World War II, when mortgage finance dried up and property was destroyed on a major scale. The US Reconstruction Finance Corporation (RFC) was a central component of Roosevelt’s New Deal, financing a huge expansion in infrastructure in the 1930s.15 State investment banks played a key role in the rapid growth of East Asian countries in the 1970s and 1980s – the so-called ‘East Asian miracle’. Globally, by the 1970s, governments owned 50% of assets of the largest banks in industrial countries and 70% of assets of the largest banks in developing countries.16 The emergence of neo-liberal finance policies in the 1980s and 1990s, as described in chapter 3, saw a wave of privatizations of public banks. From 1987 to 2003, more than 250 banks were privatized, raising US$143 billion.17
State investment banks can also play an important role in stimulating innovation because of their capacity to provide patient capital to potential growth sectors that private-sector banks and investors find too risky or too low yielding.18 For example, a recent study found that a large proportion of patient capital supporting green energy projects came from public institutions, including SIBs, rather than the private-sector sources more usually associated with financing innovation.19 Historically and in the present, SIBs have also supported SMEs that otherwise struggle to obtain finance from the commercial banking sector and who in many cases lack property-based collateral. Both the German and Canadian SIBs, both set up in the post-war period, have played a key role in supporting SME sectors throughout their 60-year history.
After the outbreak of the global financial crisis in 2007, many SIBs across the world played a significant counter-cyclical role, increasing their loan portfolio by 36% on average between 2007 and 2009, with some increasing their loans by more than 100%.20 As private finance has retreated from the real economy and become increasingly financialized, SIBs have increasingly stepped in to fill the gap and have become key domestic and global actors driving growth and innovation.21
Alternatives to bank debt financing
Bank debt has certain advantages over other forms of financing such as equity investment: most obviously it offers a return to the lender that is fixed as long as the borrower remains solvent. In contrast, equity-based investment involves the lender sharing risk with the borrower.
But since the 1980s, as banks have increasingly turned towards property-related lending, it has become less clear that bank debt provides greater economic benefits than harm. Bank credit-driven house price bubbles and the resulting financial crises have increased in frequency in recent decades, and the resulting recessions have increased in depth. Although land-backed collateral gives the appearance of security, in fact mortgages are inherently risky for banks since they are generally more illiquid, with long maturities, than banks’ liabilities, which are usually deposits or short-term wholesale securities. As a result, banks have built up a major ‘maturity mismatch’ and are prone to increasing liquidity crises.22 In addition, as we have seen, land’s natural scarcity and fixed supply mean that land and property prices typically rise and fall more rapidly than other assets as economic conditions change. Holding large quantities of such assets arguably makes banks’ balance sheets more pro-cyclical than holding a diversified portfolio of business loans.
Following the crisis of 2007–8, a number of proposals have been put forward suggesting alternatives to debt-based financing for home purchase. One argument is that mortgage debt should be more ‘equity-like’, with the lender sharing the risk of the home depreciating. This could involve the use of Islamic finance mortgages, where resident households and banks become the joint owners of a property until it is fully repaid by the resident. Similarly, ‘shared responsibility mortgages’23 would involve mortgage payments falling in value with the house price, but lenders would gain from any increase in the house price if the home is sold. This would protect poorer households, but whether it would be sufficient to prevent fire-sales of property in a rapid downturn, or prevent banks contributing to house price increases via excessive mortgage lending in the good times, remains to be seen.
A more permanent solution for de-linking land from finance would simply be to prohibit banks from lending against property assets. Mortgage finance under such a regime could be provided by institutional investors with long-term liabilities, such as pensions funds and insurance companies, to solve the problem of maturity mismatch. Such investors would be in a better position to agree to more equity-like repayment contracts given their long-time horizons. Banks could still play a role by issuing covered bonds backed by mortgages. Denmark has employed such a scheme very successfully for many years. Its mortgage market, despite being large relative to GDP, came out of the crisis relatively unscathed.24
5.3 Reforming fiscal policy: taxing land values
Reforms to the banking system would suppress perhaps the most important source of finance flowing into property – newly created credit and money. But in a post-crisis world of low interest rates, land and housing will remain a highly attractive financial asset for speculative investment. As explained in preceding chapters, domestic property has enjoyed hugely favourable taxation treatment since home ownership became the dominant form of tenure in advanced economies. Reversing this and treating landed property in the same way as any other financial asset seems essential if we are to bring house prices back to levels closer to incomes and prevent damaging rent extraction.
Economists, famously, agree on very little. But one exception is that a regular tax on the increasing value of land – a land value tax (LVT) – would be a very good idea. This was the favoured solution to the problem of land rents advocated by the classical economists and Henry George as recounted in chapter 2. Whilst there are a couple of different variants, the basic conception of an LVT would be an annual tax on the incremental increase on the unimproved market value of land that would fall upon the owner of that land.
The ‘unimproved’ value is important. The idea of the tax would be to capture as accurately as possible the economic gains deriving from investment in a location that are not due to the landowners’ own efforts; the tax would capture for the public purse economic rent. Thus, if you put in a new kitchen on your property or converted the loft, this should make no difference to the valuation of the land underneath your property. However, if a new rail station opens near your home, giving you much faster access to the town centre, you would pay a little more tax each year because the locational value of the land on which your property stands would have increased. The converse would also apply, however: if the value of a location fell, the levy would also fall.
An LVT of this type would be both fair and economically efficient. By attaching a cost to owning land, LVT diminishes the incentive to buy land for speculative purposes – i.e. to realize capital gains – rather than productive purposes or simply to provide shelter. Knowing that any increase in the value of a property would be taxed should lead to a shift towards households purchasing a house purely on the basis of its value as a place to live – i.e. a consumption good – rather than a financial asset. There would be less incentive for developers to hoard undeveloped land. Such a tax would likely end the practice of ‘land banking’ or ‘slow release construction’ that is such a problem in countries like the UK where developers have no incentives to build and sell property efficiently because the capital gains on their assets are rising, despite the shortage of housing the country faces.
Assuming house prices would also fall as a result, other forms of more productive investment – such as investment in shares or small businesses – might become more attractive. Likewise, firms might switch more of their profits to capital investment rather than buying up real estate.
A tax on land should naturally reduce mortgage lending. Under current arrangements, as land values increase, landowners/home owners benefit from most of this increase as the value of their properties increases. In most advanced economies, they are able to capitalize this increase via home equity withdrawal. The larger the increase in land values and thus property equity, the larger the loan the bank will be prepared to make, all else being equal. Of course, the larger and longer the loan, the more of the economic rent will flow to the bank in the form of interest payments. With a sizeable LVT, most of the increase in land values flows to the public purse, leaving just a small proportion for the household to use as collateral. This would inevitably reduce the size of mortgage loans and the rentier interest profits flowing to banks.
An LVT would be also be efficient because it would not distort investment decisions in the way other taxes do. Taxes on incomes and sales taxes reduce people’s spending power and thus demand in the economy. Taxes on company profits may mean firms pay lower wages or reduce investment. This is not to say all such taxes should be dropped, but rather the burden needs to be shifted towards economic rent from land. Remarkably, today ‘immovable property taxes’ make up just 1% of GDP and 2.5% of total tax revenues on average across the OECD economies.25
Additionally, since land cannot be hidden or moved to a tax haven, land value taxation is difficult to avoid or evade – which contrasts well with many other forms of tax in a globalized world, as we have seen with recent tax avoidance scandals. Empirical studies support the theory, finding that taxes on immovable property are the least damaging to economic growth, with income and corporation taxes the most damaging.26
With so many clear economic advantages to LVT, the obvious question is why has it not happened already? There are major political challenges with any kind of property taxes in Western democracies where home ownership and the idea of wealth generation from the home have become culturally entrenched. There are genuine fairness issues in some cases – in particular where a household or individual is asset-rich but cash-poor, meaning a tax would significantly reduce their income.
But these concerns could be overcome. Any land tax could be introduced as part of a wider tax reform that would reduce other unpopular and regressive taxes such as income or sales taxes. Exemptions for low-income home owners, or allowing home owners to defer payment until sale, may reduce the political difficulties of land taxes. Or home owners could give up a percentage of their equity in the property each year that wasn’t paid to the state, enabling the community to gain from any capital appreciation.
Another option would be to hypothecate the proceeds of a large-scale land tax evenly across the population as some kind of universal basic income, or perhaps hypothecate it to support a widely popular public service such as national healthcare. Reframing a property tax as a shared citizens’ ‘land dividend’ could make it more appealing in the public imagination. Finally, reducing the saliency of the tax by withholding it at source from employment or pension income could make it politically more acceptable.
Ultimately, the biggest challenge facing the implementation of taxes on land may be that the most powerful groups in society tend to have the most to lose from it. Nevertheless, the stagnation of incomes and ageing demographics that have been a feature of advanced economies over recent decades suggest the policy may become more politically attractive. Recently there have been calls by major international bodies, including the OECD and the IMF, for an increase in property taxation as the tax best placed to boost growth in the post-crisis period. As incomes decline and wealth increases, and financial wealth becomes ever harder to locate and tax, it will be tempting for politicians to turn to land and property taxation to maintain tax bases.
5.4 Rethinking home ownership and tenure
The third option for breaking the housing–finance feedback cycle would be to separate the value of land from the cost of housing. By keeping land – and the economic value of land – outside the market economy and the financial system, the banking sector would be forced to find alternative ways of de-risking its lending. Few banks will be prepared to lend purely against the deteriorating value of the structures on top of a location. An effectively implemented and regularly updated LVT would go some way to achieving this goal, but the risk with any tax is that it might be phased out as the political sands shift.
Whilst the quantity of land is fixed, the rules, norms and policies relating to its usage, ownership and governance have varied immensely throughout history, and are a major determinant of the role land plays in the economy.27 Since the enclosures began in England in the late fifteenth century, private ownership of land has risen to become the dominant form of land tenure around the world. However, as with most historical upheavals, there have been other trends running concurrently which have drawn on entirely different economic and cultural roots. Even among today’s advanced economies, private landownership is not absolute, and alternative models of ownership have continued to exist.
Public ownership of land
At its simplest, public ownership serves to remove land from the market in perpetuity and to socialize rents in the process. Public landownership today is widespread and takes many forms: from public parks and public highways, to social housing and heritage buildings. Holding land under permanent public ownership can ensure that such socially desirable uses are preserved in particular locations when market forces would dictate that they make way for more profitable uses, squeezing affordability.
In Singapore, for example, a densely populated city-state island of 3.9 million residents, 90% of the land is owned by the state. Most of the land was acquired in the 1960s, 1970s and 1980s after the 1966 Land Acquisition Act that abolished eminent domain provisions requiring compensation to landowners. Eighty-three per cent of the population now live in housing leased to them by the government through the Housing Development Board (HDB). Land is also leased to the private sector for construction before being returned and released to residents.
The HDB also provides subsidized mortgages to HDB home owners via the ‘Central Provident Fund’ (CPF). This is a fully-funded, pay-as-you-go social security scheme which requires mandatory contributions by both employers and employees of a percentage of the employees’ monthly contractual wage towards his/her account in the fund.28 The CPF itself invests its balances in government debt and the government issues a variety of affordable housing loans to the HDB, creating a virtuous circle of socialized non-bank mortgage finance that has proven effective at providing affordable housing.29 The average house price-to-income ratio in Singapore is one of the lowest in Asia and has been falling since a housing bubble in the mid-1990s. Meanwhile, the system provides the Singapore government with a handsome source of public revenues. In 2012 alone, government receipts from land sales totalled the equivalent of £9.1 billion.30
In South Korea, around half of all residential land development and almost all industrial land development are carried out by the Korean Land Corporation (KLC). Since being formed in 1975, the KLC has played a key role in transforming the economy by efficiently managing land and promoting economic development. The KLC’s functions include developing and selling land for residential use, acquiring idle and vacant land for resale at current usage prices and developing new towns.31 This has helped ensure that land and housing has remained affordable in South Korea.
Of course, majority state ownership of land may not be politically feasible in many Western countries. However, similar principles can apply on a smaller scale. If public-sector entities are willing and able to get hold of sufficient land for entire new settlements at current usage prices, it becomes fairly easy for the public body to capture the uplift in land values created by the development of the new town. This enables the cost of the original land purchase to be made up and exceeded, with profits put towards further upgrades to infrastructure. This is the model that was used successfully in the development of New Towns in the UK in the 1960s.
A similar approach can be used to capture the land value uplift created by the provision of infrastructure. If a public body acquires land at pre-development prices, it can then sell or lease the land at development prices upon completion of the new infrastructure, thereby capturing the rent itself. This form of land value capture has been most effectively used to finance Hong Kong’s Mass Transit Railway.32
These kinds of benefits could be achieved on a national scale by establishing national land banks or development authorities responsible for purchasing, developing and selling land for residential and commercial use following the Korean model. These land banks could use public money to buy land without planning permission and then lease or sell land to private developers at development prices following the granting of planning permission. As well as being a source of land release for housing and other development, the increase in land values could provide significant sources of revenue for the government.
Such public land banks could also potentially play a role in easing the fallout from a house price deflation by purchasing the land from property owners facing negative equity in countries with high mortgage debt-to-income levels. The land could then be leased back to them, meaning they could stay in their homes and use the additional funds to help pay back their mortgage. This would be a form of land rent socialization that, if carefully managed, could enable a gradual de-linking of finance from property.33
Alternative tenure patterns
Tenure patterns play an important role in mediating the impact of deregulation and innovation in the financial sector. The higher the levels of home ownership in an economy, the greater the impacts of such developments are likely to be. This is because renters are not in a position to leverage against their property. As discussed, the general pattern in advanced economies has been an increase from around 40% home ownership in the 1940s to closer to 60% by the 2000s.34 But there are some interesting exceptions. Not all countries implemented changes in policies to boost private home ownership and mortgages. Germany, Austria and Switzerland, where home ownership rates are below 50%, provide good counter-examples.
In Germany, loan-to-value ratios at savings and mortgage banks (the main providers of home loans) were often capped at 60%. At the same time, the comparatively high levels of rent protection that were put in place in the immediate post-war years were maintained in the following decades. Leases are granted for an unlimited period of time and landlords can only evict for a handful of specific reasons, such as multiple months’ unpaid rent or significant damage to the property. There are also protections against excessive rent hikes. In addition, the German tax code provides only limited incentives to take on debt. As a consequence, the home ownership rate in Germany stood at 43% in 2013 and was hence only marginally higher than the 39% ratio reached in 1950.
Switzerland is one of the few remaining advanced economies that still levies taxes on the imputed rents of house owners. It also has rent caps in many cities, and many Cantons ban foreigners from buying up property. Home ownership in Switzerland has remained around 35% in the past half century. And, also like Germany, Switzerland has a more devolved fiscal, planning and banking system, with the Cantons having considerable autonomy over these issues.
Overall, there is little evidence that economies where private home ownership dominates as a form of tenure are more productive or efficient. A number of empirical studies find a positive relationship between the growth of home ownership and increasing unemployment in a given area or country.35 Countries with high levels of home ownership will likely have less mobile populations, reducing the efficiency of the distribution of labour and increasing the likelihood of NIMBYism (Not In My Backyard) that may impede economic development.
Easy access to housing credit may provide a short-term boost to consumption but ultimately results in greater financial fragility and growing wealth inequality. Housing policies should be tenure-neutral in terms of subsidies or taxes offered or taken by the state. The private rented sector should be made as secure as possible, with long guaranteed tenancies, limitations on rent rises and strong tenants’ rights. Government should take steps to boost the stock of non-market housing, including homes with social rents, community-led schemes and co-operatives to ensure that different housing types and sizes are available in all tenures, and to make housing supply less dependent on the volatile private market in land and homes.
Finally, decent investment alternatives and secure pensions should be provided so that households are less prone to invest in the housing market to pay for their retirement, or to rely on it to fund their care in old age. When people are not fearful of never being able to get a secure, affordable home – or of missing out on a massive wealth gain – they do not feel so inclined to plough all of their earnings or borrowing capacity into housing.