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