Goverment housing policy – still in the 1980s
It seems that we are doomed to repeat our mistakes. Well at least the Con-Dem government is. A question has been doing the rounds recently in an attempt to explore the current Con-Dem approach to the economy by comparing it to a fabled Tory golden age: what would Thatcher do?
The answer would be simple: strip the state’s assets and put them into the hands of the markets.
Yesterday’s announcement that the government was planning to ‘get Britain building’ should set off alarm bells for anyone who has taken the slightest notice of the housing market over the last thirty years. In a desperate attempt to boost the economy the government wants to introduce a mortgage indemnity scheme, where the government would underwrite mortgages – for lenders – of up to 95 per cent loan to value. This means the taxpayer will carry the risk of high LTV mortgages going south.
And South is where much of this money will go. As house prices are already high in the southern regions, returns there are much more attractive for developers. This means yet again, government adding further heat to an already overheated south, boosting building in already overcrowded areas or on attractive greenfield sites, and help further push southern region house values into the stratosphere.
At a time when government can hardly issue a press release without mentioning national debt, it intends to implement a scheme which will increase personal debt and government risk of debt, as lenders will take full advantage of this guarantee. It’s not hard to imagine that underwriting decisions by lenders will be made in this light, making risky lending decisions more common.
So who benefits? Builders build, lenders lend and people will get to buy pretty new houses. Sounds great doesn’t it? But what this plan really represents is a privatisation of the profit whilst nationalising the risk.
It seems this government is only too happy to help the dead hand of the market along, despite the claims of Tories and Lib Dems.
Sadly, Labour support this policy.
Instead of creating another housing price bubble built on debt – underwritten by the tax payer – there should be a move to fund the building of affordable social housing. The Tories started to kill off social housing with the right to buy scheme (another example of tax payer funded housing market interference). Labour failed to stop the decay, instead allowing councils to offload their social housing portfolios into arms length management organisations and privatisation on the cheap.
We have a government and ‘opposition’ policy which will encourage subprime lending masquerading as first class mortgages (where have we seen that before?) that will ultimately fail to provide what is desperately needed: quality low cost housing developed to meet the needs of a 21st Century society.
A national social housing building and renovation project could be used to usher in a new generation of low and zero carbon housing, provide much needed building jobs with new skills using sustainable technologies, which could help kick start a fledgling green building industry.
There is a housing crisis, but it offers an opportunity to regenerate Britain’s housing into something that would benefit society a lot more than the short term interests of property speculators. Instead of getting all misty eyed over 1980s Thatcherite home ownership dogma we need a diverse – and sustainable – modern housing infrastructure to face Britain’s future housing needs.