The response on all sides of the housing industry was the same: it’s the mortgage market, stupid!
Gordon Brown made it clear when he came to power last June that housing was his top priority. Alas, since then the housing market has bombed – and so too has Brown’s popularity. There was an opportunity this week to turn the tide with the series of housing announcements made on Tuesday (page 11). Unfortunately the government didn’t take it.
First, Brown and his ministers proposed a shot in the arm for housebuilders by making £300m available to help 10,000 first-time buyers buy newly built homes. Although this would be an average of £30,000 per applicant, it would still require people to raise mortgage finance. No easy task when mortgage lenders eschew these types of shared-equity deals because of the relatively high level of defaults.
One housing association boss said this week that he was aware of only three building societies that were prepared to consider making these loans. Also, as one City analyst pointed out, with house prices set to continue falling, shared equity could soon become shared negative-equity.
Second, there was the “will they, won’t they” decision on a stamp duty holiday. Although this has been welcomed, any possible benefit has already been undone by the hit taken by housebuilders on the slowly-recovering amount of reservations they were receiving. This recovery fell off a cliff the moment it was leaked last month that the chancellor was even considering the move. In any case, let’s not forget that precisely this measure was brought in in the winter of 1991 by then chancellor Norman Lamont – to negligible effect.
Third, the government is to release £400m of the Homes and Communities Agency’s budget early to allow social landlords to help prop up their programmes and build “5,500 more homes”. This measure has been derided for the simple reason that housing associations depend on being able to sell homes to cross-subsidise their schemes. With buyers scarce or unable to get a mortgage, the amount of public subsidy needed to replace this shortfall will quickly be eaten up.
So what should Brown have done? The response on all sides of the housing industry was the same: it’s the mortgage market, stupid! If Brown wants to make an impact, then he should take measures, however costly, to get banks lending again. He could also use some of the HCA’s cash to buy land where people want to live and secure a 10-15 year supply of land for affordable housing. The bottom of the land market is about to be called and Brown’s time could be too unless he is more courageous.
2012 here we come
This week we kick off our Countdown to 2012 series which will follow the highs and lows of what is touted as Europe’s largest construction site: the lower Lea Valley in east London. As we tick off the 47 months until the opening ceremony of the London 2012 Olympics, we will document it all, culminating in what we hope will be a celebration of the British construction industry’s achievement. As Olympic Delivery Authority chief David Higgins (page 36) is all too well aware, the clock is ticking…
Stuart Macdonald, deputy editor