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 »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 »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 »What help for housing?
Posted: April 23, 2020 Filed under: Coronavirus, Help to Buy, Home ownership, Housing market, Private renting, Stamp duty 1 CommentOriginally posted on insidehousing.co.uk on April 23.
An extension of Help to Buy looks likely, a stamp duty holiday probable, but what else should the government do when the housing market eventually emerges from its Coronavirus freeze?
Vested interests are already out in force making their case and can cite the effect of a downturn on housebuilding numbers, the economy and tax receipts in their support.
And if anyone is feeling a sense of déjà vu this is of course pretty much where we were in 2008, when the housing market slumped in the wake of the credit crunch.
Help to Buy and wider housing policy
Posted: September 18, 2019 Filed under: Help to Buy, Housebuilding, Uncategorized Leave a commentOriginally posted as a blog for Inside Housing.
So much has been written about Help to Buy that by now everyone knows what they think.
If you’re a housebuilder the equity loan scheme introduced in 2013 has meant more new homes and more buyers.
If you unable to get a mortgage, the scheme may have offered a first step on to the housing ladder that would not otherwise have been available but you may be wondering about the quality of your new build.
If you’re a critic, even if you concede the first two points, the biggest impact has been on housebuilder share prices, dividends and executive bonuses.
Evaluations published so far have provided evidence to back up both sides of the argument. On the positive side, 37% of borrowers said they could not have afforded to buy without it; on the negative, that could also mean 63% did not need help.
The new feature of a report published yesterday by the Commons Public Accounts Committee (PAC) is that it takes a step back and considers the impact on the government and on wider housing policy.
The long-term cost of Help to Buy
Posted: June 13, 2019 Filed under: Help to Buy, Housebuilding, Uncategorized | Tags: National Audit Office Leave a commentOriginally posted on June 13 on my blog for Inside Housing.
Whatever you love it or hate it, Thursday’s report from the National Audit Office (NAO) will probably not do much to change your mind about Help to Buy.
If you think that the equity loan scheme first launched in 2013 has boosted housebuilding and helped more people to buy their first home, you will find evidence to support that view: new-build property sales increased from 61,000 a year in 2012/13 to 104,000 in 2017/18; and around 81% of people using the scheme have been first-time buyers.
If you think the scheme has mainly benefited housebuilders and the benefits for buyers have been more limited, you’ll find backing for that too: 63% of borrowers could have afforded to buy anyway; many of them have used the scheme to buy a bigger house than they could previously have afforded; and 10% of buyers had incomes higher than the £80,000 (£90,000 in London) limit for eligibility for shared ownership.
The report does reject one common allegation made against Help to Buy by estimating that homes sold under the scheme have cost just 1% more than similar new-build homes. Previous estimates ranging from 5% to 20% have not compared similar properties, says the NAO.
However, that is just part of a much bigger new-build premium (the difference between prices of new and second-hand homes) and the NAO seems to accept the high figure of a premium of 15-20% as a given rather than the product of market conditions that Help to Buy helped to create.
It’s not just about Help to Buy
Posted: February 28, 2019 Filed under: Help to Buy, Housebuilding Leave a commentOriginally posted on February 28 as a blog for Inside Housing.
All the headlines this week are about Persimmon and Help to Buy but the issues with housebuilding are much bigger than either.
Yes, Persimmon is the most extreme example of the gains made on the back of state intervention, with profits of £1 bn and margins of over 30% to go with those huge executive bonuses that made it the poster child for corporate excess in the industry.
And, yes, Help to Buy supported almost half of its 13,341 private completions in 2018 and a major part of the rest of the industry’s output.
Public and media outrage has now reached the point where ministers feel they have to act and housing secretary James Brokenshire let it be known over the weekend that he has ‘become increasingly concerned by the behaviour of Persimmon in the last 12 months’.
What’s in the Budget small print?
Posted: October 30, 2018 Filed under: Council housing, Help to Buy, Housebuilding, Planning, Shared ownership, Uncategorized | Tags: Budget 2018, Letwin review Leave a commentOriginally published on November 30 on my blog for Inside Housing.
If you listened to the chancellor’s speech you may have thought this was a Budget that did not mean much for housing. As ever you may think again after reading the small print.
As I live blogged for Inside Housing yesterday, the big news in the speech was the extra money for universal credit that makes up for many of the cuts imposed in universal credit and delays the roll-out yet again and sounds like it will be enough to avoid a backbench Tory rebellion.
Elsewhere, Philip Hammond found £2.8 bn to bring forward cuts in income tax allowances by a year but he failed to find roughly half that to scrap the final year of the freeze in most working age benefits including the local housing allowance.
This was a clear political choice to go for tax cuts that overwhelmingly benefit the better-off over benefits that go to the poorest households.
Ahead of the next spending review, numbers crunched by the Resolution Foundation overnight suggest that the squeeze on everything apart from health will continue well into the 2020s.
However, the most interesting developments for housing came in the background documents published as Mr Hammond sat down.
Where next for Help to Buy?
Posted: September 6, 2018 Filed under: Help to Buy, Housebuilding Leave a commentOriginally published on September 6 as a blog for Inside Housing.
Take a quick look at any of the results published by the major house builders this week and it becomes clear just how dependent most of the industry still is on Help to Buy .
Barratt relied on Help to Buy equity loans for 36% of its sales in the year to the end of June – to put that in perspective all its other private sales only accounted for 31%.
In the past six months, Help to Buy accounted for 39% of sales at Taylor Wimpey and 36% at Bovis.
And a presentation to analysts by Redrow showed that 40% of its sales came via Help to Buy in the year to the end of June.
No wonder its chair Steve Morgan calls it a “godsend”and wants clarity about what happens when the scheme expires in March 2021.
A report from the Home Builders Federation (HBF) this week claims that Help to Buy has been an “unmitigated success”, ensuring the construction of 170,000 new homes in its first five years, while supporting 150,000 jobs and helping 137,000 first-time buyers on to the housing ladder.
But increasingly hostile coverage in the national press concentrates far more on soaring profits, pay and shares at the major house builders and wealthier buyers taking advantage of interest-free loans that they do not need.
Jules Birch 