Stephen Hammond MP: How this Government will boost home ownership
Stephen Hammond is the Member of Parliament for Wimbledon. His article is the second in a seven part series of articles by Conservative MPs, each discussing the Coalition's policies to get more people into good homes.
Shadow Housing Minister Jack Dromey, incredibly Labour’s eleventh holder of the brief since 1997, yesterday talked about a "growing housing crisis", in a sign that Labour may finally have woken up to the mess they left behind. With Labour out of office, the recovery is now underway, the latest figures showing that housebuilding is up over a quarter under the Coalition. And yesterday the Government’s wide-ranging new Housing Strategy was unveiled to break the cycle in which the lenders won’t lend, the builders can’t build and the buyers can’t buy.
Dromey’s answer to kick-start housing is to re-introduce a "bank bonus tax to fund 100,000 jobs for young people and build 25,000 more affordable homes". But Labour in Opposition have already spent the proceeds of this ten times over. And Alistair Darling, the Chancellor who first introduced the tax, said it could only ever be a one-off. Even if the proposal were economically literate, 25,000 homes would not go nearly far enough in fixing the shortfall left by Labour. Our strategy is far more ambitious, aiming to deliver several times that number. Perhaps Dromey’s predecessor Alison Seabeck wasn’t wrong when she recently admitted Labour "won’t rush into policy making" on housing.
Although, when they do enter the policy debate, one is quickly reminded why Labour should never again be left in charge of housing. At a time when we need to be rolling back Labour’s bureaucratic legacy, Dromey has recently called for more regulation on the private rented sector, which would impose more burdensome red tape on good landlords across the country. This would also raise the cost of renting privately, which flies in the face of his criticism that rental prices are already soaring. And at Labour Party Conference, he clamoured for the return of unelected regional quangos and housebuilding targets that proved so damaging to the housing market under Labour in the first place.
Unlike Labour, whose former Housing Minister, Caroline Flint, recently labelled the pursuit of home ownership an "English disease", the encouragement of aspiration and opportunity is core to Conservative beliefs. And ensuring there are enough houses so that our citizens have the ability to own or to rent homes to live in or to bring up their families in is a key commitment of this Government.
There are now some 3.4 million households privately renting, with a million of these containing children; but access to ownership for these households appears increasingly out of reach. The median house price is now seven times median earnings, a doubling over the past fifteen years. Therefore access to liquidity and improving affordability is key for these households. As the Prime Minister yesterday stated: ‘It is doing huge damage to our economy and our society, so it is right for the Government to step in and take bold action to unblock the market’.
The new housing strategy has two policies to unblock the market, specifically aimed at first-time buyers who create necessary demand by not only purchasing new properties but also by being the first link in a chain of buyers. The FirstBuy equity loan scheme will see the Government combine with the house building industry to provide the capital for over 10,000 first-time buyers who purchase a new-build home with an equity loan of up to 20% of the value of the property. This scheme will allow deposits to be more affordable and the future repayment of equity loans will provide for further investment in the longer term.
The mortgage support measure announced in the Housing Strategy is innovative. The Government is entering into partnership with the Council of Mortgage Lenders and the House Builders Federation to provide a mortgage indemnity scheme. This scheme will provide 95% loan-to-value mortgages backed by an indemnity fund. This will allow both the affordability and the liquidity required by first-time buyers.
The size of deposit should now be in reach of many of those privately renting or aspiring to first-time ownership - particularly when combined with the FirstBuy scheme. To those who say this leaves the Government exposed to huge bad debt risk; the response is that the scheme ensures no compromise on lending quality but creates opportunity for the creditworthy aspirant buyer. To those who say this isn’t very Conservative; the response is that ensuring markers can function more efficiently and encouraging aspiration and home ownership are the bedrock of our principles.
Under Labour, first-time buyers across the UK fell from approximately 500,000 in 1997 to 185,000 in 2009. While Labour do down the aspiration of home ownership, we Conservatives believe it to be a virtue. The Coalition’s policy is giving confidence that the UK’s long-term interest rates will remain stable so policies which overcome the short mismatch over affordability and liquidity should be welcomed and applauded.