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Help to Buy is not the answer to the housing crisis.



George Osborne's Help To Buy Scheme Could Threaten UK Financial Stability




George Osborne


 
The “help to buy scheme”, get a “foot on the ladder”, “only” 5% deposit needed, building “low cost” homes to meet the housing crisis, etc etc the array of cliché ridden headlines and news programme interviews are almost endless. All the rhetoric and spin aimed at one objective. That is, to convince a sceptical public that this government, the same as previous governments, is tackling the housing crisis in this country by encouraging demand for homes and thereby stimulating the building industry. The reality is of course, rather different.
There is no doubt that there is a housing crisis of significant proportions in the UK today. Various measures have been proposed over recent months, all of which seek to address some element of the problem. Iain Duncan-Smith, the Work and Pensions secretary, with his so called bedroom tax, seeking to drive people out of under occupied accommodation and into smaller housing units to free up homes for larger families currently in overcrowded conditions. 




Iain Duncan-Smith


 
The Chancellor, George Osborne introducing phase 2 of his “Help to Buy” scheme increasing the government guarantee element to provide that borrowers will only need to find a 5% deposit when applying for a mortgage.
Both of these government initiatives however, are negated by the same underlying problem. In the case of the Iain Duncan-Smith plan, there are simply no smaller housing units for people to move to, even if they had the desire or inclination to do so. In the case of “Help to Buy”, the problem is that there are insufficient houses, either new build or established, to meet a growing demand.
A recent interview on BBC television News, had a quote from an industry spokesperson saying that “The help to buy scheme will allow developers and builders to charge more for the houses and increase their profitability which will be good for the industry.” He said nothing about increasing the number of houses available in real terms. Clearly, the Help to Buy scheme has more to do with builders and developers profits than with providing homes for “hard working people”.,another favourite cliché of the ConDem coalition propaganda machine.
All this pre occupation with getting a foot on the ladder, help to buy and affordable homes for hard working people, overlooks all those who cannot or never will, be able to afford to buy and are therefore consigned to the rented sector both private and social. In this area, the government, and the opposition, are strangely silent. In fact, their silence is deafening. Millions of people, including “hard working families”, the disabled, the pensioners those with insufficient income to be able to buy a home, low cost or otherwise, are relegated to the position of second class citizens frequently in unsuitable conditions, exceptionally high rents or some other vagary of the markets.
Paradoxically of course, this is one sector of the housing industry where governments could and should be intensely involved, not only to address the shortages of housing, but to promote real growth in the economy by stimulating the building companies and developers in a positive fashion.
I refer of course to the provision of social housing, either through local authorities or through housing associations acting on their behalf. Local authorities across the country hold tens of thousands of acres of land eminently suitable for social housing. By releasing this land for development themselves or through hosing associations, we could begin to address the housing shortages and stimulate the economy with real activity.

 


Social housing


 
However, we all know that this course of positive action would never be on the agenda for any conservative government, which for dogmatic political reasoning finds the prospect of social housing an anathema to their philosophy. After all, they spent many years from around 1980 onwards, desperately trying to sell off the entire housing stock of local authorities coupled with a prohibition on building more.
Harder to understand is the apparent aversion to promoting polices for the building of rented accommodation by the Labour party, both now, in opposition, and previously in government. It is as if the needs of ordinary people in terms of housing, are somehow a taboo subject, lost in the rush to secure the support of “hard working families” trying to get a foot on the housing ladder.
This latest government initiative is likely to go the same way as other initiatives in this area. The short term benefits (if any) of the “Help to Buy” scheme will be absorbed in profiteering for the developers and builders, insurance for the banking and finance sectors and increasing demand for a limited supply of houses, leading to house price inflation perhaps worse than at any other time and which is to the benefit of no one.
The problem of housing will not be resolved unless and until the politicians accept that the housing crisis is not just about low cost home for purchase, or about the availability of mortgages with or without a guaranteed element for the deposit. It is a wider and more complex issue which must be addressed as a whole, not just with piecemeal tinkering.

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