If we can't join the single currency because of the homes market, how do we change it?, asks Christian Wolmar
The announcement on the Euro has highlighted two related aspects of housing policy that are rarely brought to the public's attention – the British obsession with homeownership and our peculiar mortgage system based on variable rates.

According to chancellor Gordon Brown, the combination of these two factors has been one of the main barriers to Britain's immediate entry into the single currency.

It was an entirely predictable finding. The problem is not so much the high level of homeownership in the UK compared with most of continental Europe, more the fact that house prices have become the engine of growth of the economy. The lack of controls on banking means people are effectively allowed to cash in on the increased value of their homes by borrowing money that they use to buy consumer goods. This means any attempt to restrain house-price growth through increased interest rates will hit consumer spending with a triple whammy. First, higher rates raise the price of credit generally on all borrowing. Second, they reduce the rises in the value of housing or even lead to a downturn and all the problems of negative equity that ensue, cutting back on people's ability to borrow. Third, since most people, in our unique system, are on variable-rate mortgages, more money is going out of their pockets immediately to pay higher charges.

All this, Brown concluded, meant it was difficult for our economy to converge with that of the eurozone, given that our interest rate is currently 3.75%, a third higher than the European rate of 2.5%. But this begs the question as to whether we will ever converge and, if we do, what stops us diverging a few weeks later?

In other words, to join the euro, Brown is going to have to try to change the housing market. We did not get to more than 70% homeownership by accident. In May, a brilliant BBC TV programme, The Home Owning Dream, documented how ministers realised that subsidising home ownership through mortgage tax relief and exemption from capital gains tax was both economically and socially indefensible. Yet, none had the courage to reform housing finance in a way that would have levelled the playing field between the rented and owner-occupied sectors. The price of this cowardice may be that we can never join the euro.

To try to damp down the housing market and to reduce its huge swings, it's been suggested that there should be higher stamp duty and capital gains tax on first homes. But this sort of idea will go down like a bag of cold sick with the electors and Brown's supposed boss knows it.

The problem with the housing market is very simple: because a home is seen not only as a way of obtaining shelter but also as an investment, as soon as extra cash becomes available through economic growth or lower interest rates, there is pressure on the market and, given the supply is virtually static, prices rise.

None of the potential solutions are particularly attractive: capital gains tax would eat into people's perception of their wealth; increased stamp duty will reduce people's ability to move house and the third idea, a new property tax based on the value of the home, is probably a step too far politically, although perhaps it could be introduced at a very low rate.

Despite the political difficulties of introducing any of this, a side-effect of deciding to go into the euro clearly must be a reform of housing finance. That should encourage anyone concerned with sorting out Britain's crazy housing system to vote "yes" in the referendum on the euro.