Ministers need to be proactive in helping out with mortgages and encouraging more public sector home projects
It is absurdly difficult to buy one’s first home, with house prices still high and with banks insisting on very large deposits unless one can afford interest rates several percentage points above base rate (“Renting to be ‘way of life’ for young UK families“, News). One part of the solution could be for the government to guarantee a proportion of poorer people’s mortgages, just as richer parents can do for their adult children with one bank’s “Lend a hand” mortgage. The borrower pays a 5% deposit, the government invests a further 20% (on which it receives interest, which will be repaid once the house has risen in value sufficiently) and the lender lends the remaining 75% at a lower rate than it would lend 95%. Of course, there will be some defaults, but unless the house has actually fallen in value in cash terms, the government will still be repaid. The small number of losses should be more than compensated for by the fact that bank deposits earn more than the government’s current cost of borrowing.
The other part of the solution is to stop house prices rising rapidly once the economy starts to recover. The government needs to reduce demand by cutting net immigration, and increase supply by giving builders confidence, by guaranteeing to buy any unsold new houses.
I wonder whether housing minister Grant Shapps has the awareness to recognise the irony in what he said about the housing crisis, viz: “The housing crisis – which has been decades in the making – has led to a crunch situation in which an entire generation is boxed in.” The irony is that the present housing shortages were caused by the policies pursued by the Thatcher government in the early 1980s and those Tory councils that were led by her disciples, such as Shirley Porter.
One doesn’t need a degree in economics to realise that if the source of housing stock for those people who couldn’t afford to buy is diminished, because council houses are sold at a reduced price and the stock is not replenished, it will lead eventually to a shortage of housing, not just in the public sector, but in the private and voluntary sectors too. This shortsighted policy also caused the inevitable soaring house prices, which had such a devastating effect on the whole of the housing market.
Alongside the schemes that Shapps outlined, involving the Home Builders Federation, the Council of Mortgage Lenders and other “build now, pay later” deals, his government should restore at least some of the cuts it inflicted on public sector house building. This would be a surefire way to get the building industry moving.
So it has taken a study by Cambridge University, commissioned by the Resolution Foundation and Shelter, to discover that it is not just young, single people who are locked out of the property market and forced into the under-regulated rental sector due to rising house prices, falling real wages and banks that are unwilling to lend the percentage of the deposit demanded by them.In journalistic terms, it is stating the “bleeding obvious”.
Such is the low priority of housing in the political agenda that I registered a political party to draw attention to the situation. I stood as a candidate for the London Assembly in the London-wide top-up list. The main policy I was putting forward was that, since it is only the rich who can afford to buy somewhere to live in London, the emphasis should be on increasing both the public and private rented sector in the capital.
Yet both the government and the mayor of London, and the vested interests who try to influence their policies, keep trying to indoctrinate people that they should get on the property ladder. They don’t seem to understand that getting on the property ladder also includes renting somewhere to live and that a large section prefers to rent.
The House Party, Homes for Londoners