Opinion: A very Bad Budget for Housing
Published by Max Salsbury for 24dash.com in Housing and also in Central Government
budgetImage: via Shutterstock
Colin Wiles has over thirty years’ experience working for local authorities in London and Cambridge, and for large and small housing associations. Here he analyses what yesterday's Budget means for housing:
Let’s be honest, this was a very bad Budget for housing.
For the social housing sector the only tiny pieces of good news in the Budget Book are: a few more sites to be released to the HCA; £225 million for a measly 15,000 new affordable homes after 2015, and the promise of a 10-year level of certainty on social housing rents post 2015, (my hunch is that this will mean target rents being re-set at 80% of market rents).
The Budget also included a two-pronged attack on our remaining stock - pay to stay is back on the agenda, although it appears to be a voluntary scheme, and the Right to Buy has been re-launched, again.
The newspaper headlines have been devoted to the wider housing market. Help to Buy comprises a £3.5 billion fund to support buyers taking on a 20 percent equity loan in newbuild properties and an additional mortgage guarantee fund of £130 billion to insure mortgages of up to 95 percent, for newbuild and existing properties.
The schemes apply to all buyers and the upper value is £600,000. Both schemes require a deposit of only five percent, which for the UK average house price means just under £12,000, a sum that is within the reach of many potential buyers.
So this scheme is likely to release a five-year torrent of pent up demand for home ownership. The £130 billion cap sounds impressive but in reality most commentators agree that Help to Buy will be inflationary and will only make things worse in the long run.
The stock of existing properties is fixed, so if you pump money into that mortgage market it just pushes prices up. For newbuild, the question has to be asked, will this money persuade housebuilders to build more homes and increase supply? I doubt it.
The housebuilding industry is notoriously conservative and cautious and history tells us that private housing supply is inelastic to demand, so, unlike cars or widgets, housebuilders do not increase their production in response to increased demand.
I had a quick look through the websites of the top ten housebuilders this morning. Only three of them mentioned the Budget and none of them said they would be building more homes. My guess is that they will just carry on working their way slowly through their landbanks and maintaining their margins and their profits watching in glee as prices move upwards once more.
In fact prices are almost back to their 2008 level and that’s after five years of mortgage drought and recession. Another housing bubble is on the way.
So a disappointing Budget overall with little comfort for the social housing sector. As an aside, are we reaching the point when we have to ask if the leaders of our sector are making any impact at all on housing policy? That’s a discussion for another time and place perhaps.