Tuesday, 25 September 2012

Helping young people buy more housing

What is it about politicians and the housing market? Sure, understanding housing markets is sometimes tricky (I still struggle) but why is it that so many announcements in this area don't stand up to even the most basic scrutiny? The most recent example comes with Nick Clegg's suggestion that parents should be allowed to use their pension to help younger people buy property.

Here's my two step assessment (which can, of course, be applied to many other housing policy initiatives)

1. How many people are likely to be affected? This can be tricky to work out precisely, but often easy to ball-park. For Nick Clegg's announcement - as with a number of recent schemes - the conclusion seems to be 'not many'.

2. If the policy affects relatively large numbers of people, what's the likely impact on the housing market? This step is slightly, but not much, trickier because it involves applying some basic insights from supply and demand. There are essentially two ways to help young people in the housing market. First, increase the supply of (suitable) housing. Second, redistribute some of the existing housing stock from older people to younger people. Nick Clegg's proposal does neither of these things so even if it 'works' it won't 'help'.