Coffee House

Forget market meddling like Help to Buy: political parties should be hunting private renters

23 July 2013

23 July 2013

Ministers have been out in force today to trumpet the many virtues of a bit of market meddling also known as Help to Buy, with the details of the second phase of the scheme launched today by George Osborne. Even Mark Prisk, nicknamed by some Tory colleagues as the Invisible Minister, made it onto the World at One to argue that the scheme wouldn’t create a house price bubble because the government was doing enough to increase the supply of housing.

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Whether or not you believe this depends on whether you truly think the planning reforms have given local people more choice and have liberalised the system, or whether they’ll simply antagonise communities without increasing the number of homes.

Prisk’s colleague Sajid Javid wanted to talk about the proof this scheme offers that ‘this government unashamedly backs aspiration’.

Perhaps it does. But rather than backing aspiration for those at the bottom of the housing ladder by, er, pushing the bottom rung a little higher, perhaps ministers should be having a good long think about those aspirational voters who will continue to rent because they cannot afford to buy. The housing market doesn’t look as though it will get any less messed up any time soon. And as Fraser blogged recently, aspirational voters are increasingly seeing a trap in homeownership rather than an opportunity. This means that the party with its eyes on the prize for the 2015 general election should work on a really strong offer for private renters, whether or not they aspire to own their own homes. Labour has already floated some ideas on this, and I hear the Tories are up to something too. Ideas that seem popular with both parties include increasing the number of long-term tenancy agreements which would encourage rent stability (better than the rent controls Labour toys with every so often) and help families who want to stay in the same school catchment area for a number of years, rather than being forced to move by regular rent rises or landlords selling up. Meanwhile Labour is working on its own new set of planning reforms based on a new brand of localism. But perhaps the prize for capturing aspirational generation Y voters will go to the pragmatists who offer something for renters, rather than the meddlers who think home ownership is worth pursuing at any cost.

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  • itdoesntaddup

    Having set aside £130bn for this (and another £80bn for BTL mortgages via Funding for Lending), we are going to witness Cable moaning into his lemon tea that banks aren’t lending to business. Well, if you tie up £210bn in pumping up house prices, it isn’t available to business, is it?

    Mortgage lending is the ONLY major category that has seen continued growth in loans outstanding since the credit crisis. It’s time that mortgage lending saw a slow reduction in outstandings, freeing funds for the real economy.

  • Rob Henwood

    Propping up the housing market is an unnecessary and dangerous interference in the economy. I was hoping that the free market Tories would allow the market to correct and weed out those who had made stupid bets on land, i.e., the existing crop of house builders who are holding the government to ransom, just like the banks did.

    The failed funding for lending has done NOTHING to help businesses, just created a small pickup in mortgage lending for housing, mostly Buy To Let. REAL PEOPLE are being drained of their future prospects by soaring rent and unstable tenancies.

    The Help To Buy scheme is designed to created a pre election mini housing bubble just like Nigel Lawson did in 1986/87. The likes of Kirsty Allsopp will be rubbing their hands with glee but the government should realise that we now have a new under middle class that has none of the opportunities that were once so dear to the Conservatives. Another housing bubble will erode the foundations of society still further by putting decent people in dire straits once the bubble has burst (again).

    Rather than bet on the housing market, maybe the government should be betting on the foundations of a good economy with direct lending support for non property related businesses. That would have a more positive effect, surely, than ploughing money into essentially unproductive assets? Better that approach than this cynical scheme.

  • Lady Magdalene

    Help to Buy isn’t market meddling. It is a deeply irresponsible scheme intended to create a housing boom on the run-up to a General Election; based on debt and all-underwritten by British taxpayers.
    After only 6 months in the country, an immigrant will qualify for a British taxpayer funded loan to buy a property!
    Property prices are too high. Creating a boom will only drive them higher. It’s madness.

  • Alex

    For crying out loud; it’s simple; build more homes. Who cares if they are bought or rented; the price of a roof over your head will drop.
    But Tory MPs are fighting tooth and nail against building new homes in their constituencies. Homeowners will then vote for them because they want to keep their house value artificially high. People who can’t afford a home will move out of the constituency, so the MP doesn’t have to care about them. An approach that (along with an accelerating trend to authoritarianism) has turned me in 3 years from a Conservative voter to a never-voting-Tory-again.

    • itdoesntaddup

      Building more homes is not the realistic answer. At the best of times we build no more than 200,000 a year, many of them undesirable slums of the future. That’s about 0.7% of the housing stock. Building lots more would eventually make the country like Spain or Ireland – vacant tumbleweed plots, wasted economic effort. It’s not as if we really have an overall shortage to being with. Average occupancy across the UK is just 2.3 per dwelling – hardly overcrowding, and about as low as it’s ever been.

      We have to sort out the market. That means restoring mortgage interest rates to normal levels, letting prices fall, opening up proper competition between public sector and BTL renting, cutting the Housing Landlord benefit subsidy to BTL alongside the mortgage subsidy. This is the antithesis of pumping lots of finance into mortgages.

      • Alex

        Yes, average occupancy has dropped. So are we, as a society, saying “tough, cohabit”. Share with your divorced partner. Widows and widowers must pair off and get a place together?

        And we are a million miles away (metaphorically!) from Spain and Ireland. They built vast numbers of houses in the noughties. We built virtually none.

        But I agree 100% with your second paragraph.

        • itdoesntaddup

          We have the couple penalty and fiscal disadvantages for the married, so in fact the position is designed to encourage break-up. Decline in average occupancy has been a feature for decades – i.e. we have been building more homes faster than the population has grown.

    • Lady Magdalene

      How about forcing developers to use the land they already have banked, instead of demanding irreplaceable greenbelt for their shoddy little boxes.
      How about the Government stopping mass immigration – which is what is mainly driving the need for new housing.
      How about Local Authorities identifying already developed land within existing towns and villages which could sustain more intensive housing and making the owners an offer they can’t refuse!
      It’s the destruction of the greenbelt people object to.

      • Alex

        Yeah, the greenbelt argument. IMHO going from 8% of land with stuff on it to 8.1% would not destroy the countryside. And replacing, say, a massive rusty corrugated-iron farmers shed with a few houses would not blight the area.
        And the best way to make developers use the land they have (which is a reasonable land stock); have it dropping in value instead of appreciating; and the best way to do that; to increase the supply.

        • itdoesntaddup

          Currently there is a requirement that building land be hoarded to meet the 5 year development target. If you want to change that, perhaps the most effective way is to tax building land held for more than three years (to allow reasonable time to secure detail planning and start building) at say 2% per month until sold.

          • Alex

            I’m not sure that what the building industry needs is more taxation.
            If there is a market solution, that does what we want to do anyway (produce more land for building), isn’t that easier than making yet another law, hiring 1000 civil servants to run it, chasing down the money, fixing the ways to get round it, fixing the unforeseen effects…….
            And what if it is being help up by government bureaucracy? We may end up taxing builders for holding land that the government has stopped them building on.

            • Tom Tom

              I think major house-builders should be broken up. They have turned prime
              building land into showrooms of identikit rubbish houses using forced
              Brazilian pine and which will not be standing in 50 years time. They are
              overpriced tat.

            • itdoesntaddup

              I agree that less taxation – cut out Section 106 and infrasturcture levies, absurd greenergy building standards on pain of a large fine, etc. – would be a big help in making newbuilds more competitive in cost. But taxing land hoarding is a different animal.

    • Tom Tom

      All we need is Lebensraum. Perhaps preventing foreigners from owning property in London if they are not full-time resident in them would be a start ? How you expect to “build more homes” if the land values are so high because the demand is concentrated in the very locations that land is most expensive BECAUSE of the demand for homes, is not clear. You clearly prefer soundbiites to practical application of how to pack another 2-4 million people into London. You have two choices: either ban sales to non-resident foreigners, or clear out all recipients of housing benefit and social security to free up more housing stock

      • dalai guevara

        three choices:
        3- decentralisation

        • Tom Tom

          Wilson tried that in 1967 and used Selective Employment Tax to force more to the regions and moved DHSS centres to Newcastle and Liverpool. There is simply no prospect of England ever being decentralised away from London running its Colonies outside the Home Counties

          • dalai guevara

            Yet the US run ‘their colonies’ using a federal setup. Yet the Germans have freed up Lebensraum in Berlin and the Ruhrgebiet by decentralising to Frankfurt, SME-drenched Baden Wuerttemberg, Karlsruhe and at one point Bonn.

            Would that counter the argument that decentralisation could somehow not facilitate what you suggest it facilitates? Of course it would.

        • the viceroy’s gin

          Four choices:
          4- Slash the size of government by 1/3

          All those people can stay in that overcrowded swamp, but they’ll no longer be on the gravy train. That should do for housing costs.

          • dalai guevara

            yes – privatise all schools. Those without kids are sick and tired of paying for other peoples’ sprogs education.

            • the viceroy’s gin

              Let’s go one better than that. The sprogs can be home schooled, as that’s proven to provide a better education overall than the inferior government-run models.

              That would free up even more land and resources, and relieve even more pressure on infrastructure, in addition to relieving even more of the cost of government.

              • dalai guevara

                But then the SUV market would collapse as the school run would be a thing of the past. No, what we want is the Mastiff to come to use in Britain, now that the end is nigh abroad.

                • the viceroy’s gin

                  …no, you’re becoming indecipherable again.

  • EM

    Builders/Developers always want to keep new houses in short supply in order to maximise selling prices.

    • telemachus

      This is the crux
      And why Osborne has delayed doing much

    • itdoesntaddup

      Builders/developers want lots of mortgage funds tipped into buyer hands and surveyors to give high valuations consistent with the funding. They don’t care about supply, so long as demand can be created.

  • andagain

    Whether or not you believe this depends on whether you truly think the
    planning reforms have given local people more choice and have
    liberalised the system, or whether they’ll simply antagonise communities
    without increasing the number of homes.

    Have people started to build more homes since last year? You’d think there would be some numbers somewhere.

  • Joseph

    There is a much simpler solution – stop desinging BoE policy in a way that props up central government and ultra-leveraged home owners at the expense of well, pretty much everyone else.

  • itdoesntaddup

    £130bn of mortgage finance isn’t a small shot in the arm. It’s more than 10% of all outstanding mortgages (£1,265bn as at end May). It’s a year’s gross mortgage lending. If you double the supply of money, what do you expect to happen to prices – and to rents?

    It’s insane: trying to tinker a scheme to lock tenants in to long term high rents isn’t going to solve it either.

    Stop pumping the housing bubble. It will end in tears, with banking problems, negative equity, negative growth. Didn’t anybody learn anything from Brown’s boom?

    • dalai guevara

      It appears Gidiot wishes to hand it all back to the Labour lot with the words: here, you sort it – this time there’s really no money left…

  • AndyB

    Clever. Personally, I rent out of choice and I’m currently selling (3 down, 1 to go – done in last 3 weeks – market is shifting fast) my last 4 BTL rented properties (I jest not for those who think I may be satirising). This means I’m eligible for Help to Buy. A perspicacious if complicated post but a nonetheless accurate snapshot of our muddled housing market. For the avoidance of doubt, it seems a dead cert that house prices will rise [ceteris paribus] for the next few years IMHO. Love Isabel’s journalism for the record. I for one think she should be next Editor of the Spectator.

    • Michael990

      Why are you selling your BTLs?

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