30 years after – part 2
Posted: July 3, 2023 Filed under: Help to Buy, Housing associations, Housing market Leave a commentOriginally written as a column for Inside Housing.
Kylie Minogue is riding high in the charts, Frankie Dettori wins the Ascot Gold Cup and the housing market looks to be in deep trouble.
In 1992, as in 2023, the more some things change, the more they stay the same.
Part 1 of this column looked at the similarities and the differences between the situation now and 30 years ago. This second part looks at the potential consequences for the housing system as a whole and what the government can do about it.
Arrears and repossessions: This is the issue burnt into the collective memory from the crash of the early 1990s, with repossessions peaking at 75,000 in 1992 and more than 400,000 owners losing their home in the decade as a whole.
The political impact was huge: the economic doom and gloom may well have contributed to the surprise Conservative victory at the general election in April 1992 but Black Wednesday that September ruined the party’s reputation for economic competence for years to come.
Partly thanks to that experience, and the losses made by lenders then, we are going into this downturn with arrears around half and repossessions about a quarter of the level at the equivalent stage in the 1990s cycle when prices were just beginning to fall.
A repeat currently looks unlikely unless we see second-round effects of sustained rate rises including a recession and large-scale job losses – but the odds on those are shortening.
Read the rest of this entry »30 years after – part 1
Posted: June 22, 2023 Filed under: Buy to let, Housing market, Mortgages Leave a commentOriginally written as a column for Inside Housing.
Interest rates rising to tame inflation. Home owners worrying about how they will pay their mortgage. Politicians panicking about the economic and electoral impact.
Prospects for the housing market arguably look bleaker than at any time since the spectacular crash of the early 1990s (unless you are a renter waiting for prices to fall, of course).
Ultra-low interest rates helped the economy out of the downturn that followed the financial crisis in 2008 and have underpinned rising house prices over the last 13 years. But that whole era now seems to be over and the escape route looks blocked.
So how does the situation now compare to what happened 30 years ago? This first part of a two-part column looks at the similarities – and some significant differences.
Read the rest of this entry »The parties start to set out their general election stall
Posted: May 4, 2023 Filed under: Help to Buy, Home ownership, Housebuilding, Planning Leave a commentOriginally written as a column for Inside Housing.
If this week was a preview of what the main parties will be offering on housing at the next general election then it is probably best to look away now.
Perhaps the best that can be said is that, just as Thursday’s local elections only offer clues as to the outcome of next year’s big event, so the policies announced in the run-up to them may only be a taster of what’s still to come.
But that is being optimistic: otherwise we got some standard tropes from Labour about
home ownership and signals that the Conservatives could be about to reach back into their collection of greatest misses.
In a series of interviews on Sunday, Keir Starmer set out his ambition for Labour to be ‘the party of home ownership’:
This standard appeal to aspirational voters begs some obvious questions about how and what else.
Restoring targets for housebuilding recently scrapped by the Conservatives would be a good start and would come alongside existing Labour policies of ‘first dibs’ for local first-time buyers and a block on overseas buyers.
But whether that will be enough to generate 300,000 new homes a year (the targets hadn’t done that before they were scrapped) and whether even that will make homes more affordable must both be doubtful.
The following day (coincidence?) The Times reported that Rishi Sunak is putting Help to Buy ‘back on the table’ as a key plank in the campaign for a potential Conservative fifth term.
Government sources told the paper that the move could come in the Autumn Statement or the Spring Budget. ‘We cannot go into the next election without an offer for first-time buyers,’ said a minister. ‘We all know that homeowners are more likely to vote Conservative and we cannot cede this ground to Labour.’
Read the rest of this entry »Reading the Tory leadership tea leaves
Posted: August 22, 2022 Filed under: Housebuilding, Mortgages, Right to buy | Tags: Conservatives Leave a commentOriginally published as a column for Inside Housing.
On the surface the two Tory leadership candidates have had little new to say about housing – when they’ve even bothered to discuss it.
Liz Truss would cut red tape for housebuilding at the same time as she would scrap the ‘Stalinist housing targets’ introduced by her own party and boost community rights to object to homes that create the red tape in the first place.
Sunak would put a stop to building on the green belt, highlighting the 60 square miles lost to development since 2014 while ignoring the 60,000 square miles that are left and the fact the green belt has doubled in size since 2014.
Those contradictory ideas reveal next to nothing beyond a need to appeal to well-housed Tory members but neither candidate has said anything so far about social housing, affordable housing or private renting.
Yet there are issues and ideas bubbling away beneath the surface of the leadership contest that could still have a profound impact on housing.
Read the rest of this entry »Political chaos leaves big housing questions
Posted: July 8, 2022 Filed under: Fire safety, Levelling up, Mortgages, Private renting, Right to buy | Tags: Conservatives, Michael Gove Leave a commentOriginally published as a column for Inside Housing.
So it’s back to the future and all change at the Department for Levelling Up, Housing and Communities (DLUHC) as the dust begins to settle from the political chaos of the last two weeks.
It was a scandal involving one ex-housing minister (Chris Pincher) that triggered the revolt against Boris Johnson. Many Tories want another (Dominic Raab) to take over as temporary prime minister. And two more (Grant Shapps and ex-housing secretary Sajid Javid) could run as candidates for the permanent job.
Over at the department that keeps changing its name, Michael Gove has been sacked as ‘a snake’ and most of the more junior ministers have resigned. Stuart Andrew set a new record for a housing minister with just 148 days in the job and no time even for an Inside Housing interview to be published.
Coming in as temporary secretary of state is the familiar figure of Greg Clark, who according to some reports this morning has told civil servants that Gove will be back soon.
Confused? Significant new policy announcements are by convention ruled out until there is a new permanent leader and cabinet – but this did not stop Theresa May enshrining the net zero by 2050 commitment in law before she left office and Boris Johnson is not noted for following convention.
Read the rest of this entry »Johnson’s lame cover version
Posted: June 10, 2022 Filed under: Home ownership, Housing associations, Housing benefit, Mortgages, Right to buy 1 CommentOriginally published as a column for Inside Housing.
How exactly should we take Boris Johnson’s plans to ‘bring back Right to Buy’ and ‘turn Generation Rent into Generation Own’?
Many housing association tenants will welcome the chance to own their own home and private renters may welcome official recognition that they are stuck paying more in rent than for the mortgage they can’t get.
Equally, most social landlords will feel that they have no choice but to take very seriously a major change for housing associations and what could be yet another threat to council housing.
And anyone with even the vaguest interest in seeing more genuinely affordable homes will greet the latest guff about one for one replacements with a groan.
But it’s also very hard not to be cynical about this latest cover version of Margaret Thatcher’s number one from the 1980s. The suspicion is that this is all about a lame duck prime minister having something catchy to announce regardless of how – or even if – it will work out in practice.
Even so it’s impossible not to wonder about the practicalities of a plan to finance mortgages from housing benefit in the middle of a cost of living crisis, with interest rates about to rise at the peak of a housing market bubble that could be about to burst.
And it’s hard not to contrast Boris Johnson’s tired old rhetoric about social tenants on housing benefit being ‘dependent on the state’ with the plans announced just 24 hours earlier for a Social Housing Regulation Bill that will ‘mean more people living in decent, well looked-after homes enjoying the quality of life they deserve’.
Calling the plan ‘benefits to bricks’ looks like trolling of those who have genuinely attempted to find ways to shift subsidy to new homes.
And all of these reactions are subject to the politics of a wounded prime minister desperate to send the right signals to his party after 41 per cent of his own MPs said they have no confidence in him.
Read the rest of this entry »Gove’s grand plan leaves gaps to fill
Posted: January 17, 2022 Filed under: Fire safety, Help to Buy, Housebuilding | Tags: Michael Gove Leave a commentAs one MP put it, we welcome the steps forward in ministerial statements on building safety only to find problems in the steps backward that follow.
Michael Gove’s plans to ‘make developers pay’ represent the most positive steps seen so far but there are still major concerns over what comes next.
For starters, how exactly will he ‘make’ them? The initial plan in talks before Easter seems to be persuasion but the levelling up secretary has limited levers that he can pull and why would companies that have previously resisted calls to ‘do the right thing’ change their minds now?
He cited the way that Rydon Homes, sister company of the main contractor in the Grenfell refurbishment, was barred from Help to Buy but the scheme ends in 2023 and most of the £29 billion in equity loans has already been committed.
This highlights yet again a major flaw in the government’s support for housebuilders that I highlighted even before the creation of Help to Buy: its failure to get a quid pro quo for all that help for profits, bonuses and dividends.
Short of another support scheme, which may ironically be needed if supply plummets, that leaves blacklisting from Homes England programmes and naming and shaming as his principal weapons. Neither is a negligible threat but will they be enough?
That leaves coercion, legal action or the ‘high-level threat’ of a new tax that Gove is authorised to make in the letter leaked to Newsnight from chief secretary to the Treasury Simon Clarke.
Read the rest of this entry »Guarantees, cladding and the housing market
Posted: April 20, 2021 Filed under: Fire safety, Housing market, Mortgages, Stamp duty Leave a commentOriginally published on April 20 on www.insidehousing.co.uk.
The housing market is at a frenzied record high as house prices rise by more than 2 per cent in a single month.
Just the moment then for the government to step in with a scheme to guarantee 95 per cent mortgages for anyone who thinks they have to climb the ladder before it disappears out of reach.
The house prices in question are only asking prices as recorded by Rightmove but the £6,733 average increase between March and April reflects a rush to beat the end of the stamp duty holiday and demand for more space from people who have done well during the pandemic.
It’s now 13 months since the start of the pandemic and, to pick another measure, house prices are up by around £16,000 or more than 7 per cent since then, according to the Nationwide.
Prices initially fell amid the economic uncertainty but surged again on the back of the stamp duty holiday introduced by chancellor Rishi Sunak last July and then extended in March.
The overwhelming beneficiaries are people who already own homes who have been able to sell them for higher prices that now wipe out the stamp duty savings for most buyers. For all the rhetoric about helping people on to the housing ladder, few first-time buyers saved much in stamp duty and all now face having to spend considerably more in total.
The mortgage guarantee scheme, essentially a rehash of one part of Help to Buy, should help them by addressing a genuine problem with the supply of high loan-to-value mortgages.
However, lenders are cautious. The Financial Times reported on Saturday that the largest banks are refusing to lend on new builds under the scheme and that they may also charge higher rates and apply stricter affordability criteria.
From their point of view that makes sense to guard against falling prices, especially when they factor in the new-build premium that adds around 10 per cent to the cost of a new home. .
And the benefits look dubious for first-time buyers too. Based on the Nationwide index, a 95 per cent loan on home at the current average price would be £220,000 – more than the total price was when the stamp duty holiday was first announced.
None of this makes any sense and yet, in an under-supplied and under-taxed housing market fuelled by credit and low interest rates, somehow it does.
As memories fade of the housing market crash of the early 1990s and the downturn after the financial crisis, the logical next step would be a relaxation in affordability checks on mortgages to allow loans at larger income multiples, ignoring the lessons of the 2000s and the economic headwinds that could lie ahead as furlough ends.
But all of this is happening at the same time as the entire market for recently built flats remains mired in the continuing fall-out from the fire safety crisis.
Inside Housing reported on Friday on cases of leaseholders buying flats on the basis of External Wall System (EWS) form declaring that their cladding was safe only for new inspections to decide that it must be removed.
One buyer purchased a £350,000 flat rated A1 and safe in February only for the EWS to be downgraded to B2 just 34 days later. That made her flat worthless and left her facing costs for waking watch and cladding remediation.
If the EWS rating can be changed at the drop of a hat like this, why would anyone risk buying a recently built flat?
The government has grudgingly and in stages committed a total of £5.1 billion to fixing the cladding crisis so far and it has announced some welcome reforms to leasehold.
But leaseholders in buildings below 18m are only eligible for loans and help does not apply to other fire safety problems, leaving a significant chunk of the housing market in limbo.
The fact that at the same time the government has spent £5.4 billion on the stamp duty holiday says it all about where its priorities really lie.
The problems with Johnson’s housing priorities
Posted: October 6, 2020 Filed under: Decarbonisation, Fire safety, Mortgages, Stamp duty Leave a commentOriginally 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.
Read the rest of this entry »
Jules Birch 