The problems with Johnson’s housing prioritiesPosted: October 6, 2020 Filed under: Decarbonisation, Fire safety, Mortgages, Stamp duty Leave a comment
Originally written as a column for Inside Housing on October 6.
You are prime minister. You have £5.8 billion to spend on housing. What do you do?
Before you answer there is a catch. You are a Tory prime minister. So this has to be all about home ownership.
This is not about the Affordable Homes Programme either – although the modest increase in that is tilted towards home ownership too.
You may have guessed by now that this is about decisions already taken by Boris Johnson’s chancellor Rishi Sunak, decisions that are looking worse and worse the more time goes on.
That thought was prompted by the only ‘new’ idea that I’ve seen emerging from the Conservative Party conference: a plan to create ‘Generation Buy’ by encouraging low-deposit mortgages to help young people on to the housing ladder.
The idea revealed by Mr Johnson in a Telegraph interview on Saturday is not especially new – essentially it’s a rehash of the mortgage guarantee part of Help to Buy and it harks back to the days when Gordon Brown wanted to encourage long-term, fixed-rate mortgages – and it seems to be inspired by a report published by the Centre for Policy Studies last month.
Taken in isolation, it does at least attempt to address the problem that people unable to borrow enough to buy because of loan-to-value restrictions after the financial crisis are left with no option but to pay more in rent than they would do for a mortgage.
As Neal Hudson argues, a new credit crunch seen since the pandemic has led to a spike in interest rates on high loan-to-value loans since the start of the pandemic and it’s possible that around half of first-time buyers are now excluded from the market.
But a more relaxed regime would not help people in expensive areas to buy unless loan-to-income restrictions were also removed, which would take us right back to where we were before 2007.
And the real problem is that the new/old idea cannot be taken in isolation because of a measure already introduced by the Johnson government.
Because if there is one time not to introduce state guaranteed 95 per cent mortgages it is surely after you’ve spent £3.8 billion on inflating house prices.
Not only that, but where the stamp duty cut could have been restricted to first-time buyers, perhaps at the same time as mortgage restrictions were eased, instead it is available to all buyers including buy to let ‘investors’ and second home owners.
There is a similar problem with another government housing policy launched last week – the £2 billion Green Homes Grant scheme for home owners to boost the energy efficiency of their homes.
Again, it’s not the worst idea in the world – the existing housing stock is a major source of carbon emissions and the work will generate new jobs – and there do seem to be at least some safeguards to stop it becoming a charter for cowboy builders.
But if you wanted a strategy to decarbonise housing you probably would not start with a free-for-all that seems to have little sense of the best ways to improve particular types of home.
And when you step back for a minute and put both programmes together, that £5.8 billion is more than three times what the government is spending on a glaring problem with existing homes that has seen a key section of the housing market grind to a halt.
If home ownership has to the priority then surely the place to start is the plight of up to 700,000 people who are stuck in buildings with dangerous cladding and up to 1.5 million leaseholders whose homes are unmortgageable and unsaleable.
The £1.6 billion announced so far to fix the cladding scandal does not come close to covering the costs in high-rises and that is before you consider buildings below 18m and all the other fire safety problems that have emerged since Grenfell. The total cost could run to £15 billion.
Housing secretary Robert Jenrick hinted over the weekend and again at parliamentary questions on Monday that he is lobbying the Treasury for more money. If true, it cannot come soon enough.
The longer term question is what will follow the boom in the housing market fuelled by the stamp duty cut.
So far the government seems intent on keeping the market moving by funding affordable home ownership schemes and making it easier for buyers to borrow more money.
If – or when – the market downturn begins, will it have the imagination to switch strategy?
Boris Johnson’s speech to the Conservative conference on Tuesday offered no signs of it.
The housing section was all about home ownership as he hailed his plan to turn Generation Rent into Generation Buy with long-term, fixed rate mortgages for up to 95 per cent of the value of the home,
He said: ‘We believe that this policy would create two million more owner-occupiers – the biggest expansion of home ownership since the 1980s.’
Either there is something very big that he is not telling us, or this is just hot air, because there is no way that what he’s announced so far could achieve anything like selling off millions of council houses at big discounts did back then.
There was also a noticeably hostile attitude towards the private rented sector as he presented a picture of millions locked in cramped, rented flats during the pandemic who craved the freedom of ‘the power to decide what colour you can paint your own front door’.
That is of course exactly what Conservatives used to say about council housing in the 1980s but more than 30 years it is private rather than local authority landlords making the decisions.
By stark contrast with recent Conservative conferences, the prime minister had nothing to say about affordable, let alone social or council, housing – and nothing to say about the cladding and leasehold scandals that will have made that has made that rhetoric about home ownership ring hollow for millions.