The government’s "http://www.communities.gov.uk/documents/housing/pdf/2033676.pdf">announcement on housing today is an attempt to square the circle. On the one hand, a return to excessive lending and sub-prime
mortgages is clearly not a good thing. Critics say, with justification, look where government backed mortgages "http://www.spectator.co.uk/essays/all/2189196/clinton-democrats-are-to-blame-for-the-credit-crunch.thtml">got America. But on the other, there are clearly problems when people who aren’t
fortunate enough to have parental help aren’t getting on the housing ladder until well into their thirties. Conservatives who understand the importance of a property-owning democracy should be
concerned about this.

The Coalition’s solution — and this is the most genuinely coalition piece of policy we’ve seen in months — is partial government indemnities for people taking out 95 per cent mortgages
on new build properties. There are, obviously, worries about the government getting involved in the housing market given recent history. But I understand that under this scheme even a 20 per cent
fall in house prices would only result in a government exposure in the low tens of millions.

This is to be combined with changes to the planning laws which should significantly increase the supply of houses. Allister Heath makes "http://www.cityam.com/news-and-analysis/allister-heath/let-s-not-go-back-sub-prime-loans">a typically cogent argument that this is where all of the government’s energies should be
concentrated. But, on balance, I think there’s merit to the Coalition’s approach.

Tags: Coalition, Conservatives, Credit crunch, Housing, UK politics