Let’s play fiddle whilst the housing market burns

Well, that’s what it feels like at the sharp end.

Yesterday, the housing minister Caroline Flint announced a package of measures designed to rescue the UK’s failing housing market. Central to her proposals is a rent now buy later scheme designed to help families and first time buyers save for a deposit. She was concerned that the withdrawal of 100% loans from the market, and the vastly increased expense of 95% loans have resulted in a lack of first time buyers, even though reducing house prices should result in greater affordability.

The scheme, which I feel certain has already been referred to as “novel”, “unique” or even “courageous” by Whitehall mandarins, allows a family with an income of less than £60,000 a year the opportunity to rent a property at a discounted rate for a given period of time. Suggestions are that the discounts are likely to be at least 20% of the market rent, and at the end of the period the tenant will be given the opportunity to buy the property, or a share of the property using as a deposit the money saved as a result of the discount.

Flint said: “We are determined to continue to do everything possible to promote long-term stability and fairness in the housing market. The international credit crunch has created significant challenges not just for the UK housing market but in other parts of Europe and the US. However, the long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase housing supply.”

In addition, the Government also plans to introduce a system of local housing companies to allow councils and the private sector to work together to develop surplus land. A pilot scheme is to run in four areas, with additional assistance being provided under yet another scheme to enable 75,000 new homes to be built across those towns considered most in need. On top of this, additional funding is to be made available to enable the purchase of surplus housing stock from cash strapped developers for use as affordable homes.

Whilst the announcements have been well received by some, the general feeling is that all these scheme are nothing more than applying a sticking plaster to broken leg. Lembit Opik from the Liberal Democrats, was quoted as saying “Another day, another new affordable housing announcement. The government’s hot air will not hide the fact that 10% fewer shared ownership homes were provided last year than in 2006.”

Whilst we welcome any help which provides greater choice for new buyers, this scheme is simply a sound bite reaction to current difficulties and a further refusal to recognise the true problem. Until mortgage lenders can access funds to lend, and those which do have funds call a halt to the profiteering of recent months, house prices and their availability is likely to be a side issue. Let’s face it, even if house prices did drop by 20%, (the Land Registry says they are still increasing), first time buyers are hardly likely to rush into buying when the main lenders have increased mortgage costs by some 30%, and now require a substantial deposit as well.

The irony of the situation is that it looks as if our Government is returning well and truly to their Old Labour roots, and hoping we don’t notice. Whatever a person’s political views are, allowing someone to occupy a house owned by the council at a discounted rent seems awfully like the days before right to buy. The comparison becomes even spookier when it is realised that the whole “estate” is likely to have been bought by the council at a knock down price. This means that the clock could be turned back on efforts to integrate social housing with private, saying goodbye to the benefits that brings.