4A.7C - Negative Effects of Government Policies
UK government decisions about international migration and the deregulation of capital markets (enabling foreign investment in prime London real estate) have significant impacts on the potential for growth and both direct and indirect investment. (P: Government may create open or closed doors policies)
It could be argued that other government policies have contributed to housing shortages:
- Immigration: large-scale immigration from the EU, especially since 2004, contributed to increasing the UK population from 59 million in 2001 to 63 million by 2011. An open-door immigration may have economic benefits but it also creates demand for new houses.
- Deregulation: the UK is very open to foreign investment, including allowing foreign people and companies to buy property. In 2016, the Guardian estimated that 40,000 London properties were owned by offshore tax havens. These properties may not be lived in, or even rented.
- Second homes and holiday homes: there are few restrictions in the UK on people buying houses to rent out, e.g. as a holiday let or buying a second home. In some rural areas a large percentage of houses may not be available to local people.
All of the factors above tend to reduce housing supply and increase prices of other homes. Longer term, there is a risk that very high house prices will prevent investment in some locations. UK-based or foreign investors could be put off from investing in areas were housing for workers could be very expensive.