The Government Doesn’t Understand Housing

Image by conservativeparty via Flickr

In a speech to the Royal Institution of Chartered Surveyors yesterday Housing Minister Grant Shapps pulled the rug out from underneath the Property Industry by betraying a staggering lack of understanding of housing problems in the UK, but a scary expertise in the meaningless, but tabloid friendly, soundbite.

In his first speech since being elected Shapps announced that “the age of aspiration is back” but there was very little money left for social housing, and the government’s priority would be cutting the deficit and ensuring that the housing bubbles of past decades would not return.

Mr Shapps says 1.4 million people want to buy their own home, adding: “Another quarter of a million people can afford a mortgage of at least 80 per cent loan-to-valuation, but can’t find a lender. The banks and building societies will be asked to come and see me to explain why that is and what they plan on doing about it.”

For house building Mr Shapps said: ‘In place of regional targets, we will introduce powerful incentives, and in the place of expensive quangos, we will trust people.’ – local people will also have more decision-making powers through Local Housing Trusts where local residents would be able to develop their own vision for their community and oversee the building of new homes.

The one basic thing that the Government & Mr. Shapps haven’t got their head around is the equation:

Number of Rented Homes + Number of Owned Homes = Number of Homes

For those who don’t like algebra – if you increase the number of home-owners you decrease the number of  rented homes.

The only way to change this is to do something to increase the total number of new homes being built, but this Government isn’t doing that itself on ideological grounds (less Government not more) and is making it more difficult for private developers to build by empowering local communities to apply NIMBY views.

The BTL revolution was based around finance, if Shapps is now going to lean on the Banks to make funds available for Homeowners then there won’t be funds available to Landlords.

Now I don’t particularly like politics, but I do revel in political ironies. I loved the Labour Party bashing the Unions, getting into bed with the USA, declaring Imperialist wars, being conservative with the nations finances. I adored the Conservatives planning for a Green future, protecting the NHS, investing in welfare for the poor. Landlords are having a grim time right now – to a (wo)man we voted against Labour, and now we are rewarded with an increase in CGT and the end of the renting revolution. Landlords are waking up to the horror that the Government that they supported into power is actually anti-Landlord, and if it wasn’t so serious then it might be funny.

The National Landlord Association has been quick to recognise the threat that the new government poses to the Private Rental Sector in their blog The ‘own your own home’ myth an article that identifies some basic truths about Housing & the Government attitude:

• The reality is that the Government are now just pushing people into home ownership because an alternative would be the harder path.
• House prices are still beyond the reach of most people. Across the UK, house prices ballooned by 121% over the last decade. Although 1.4 million people want to buy their own home, 75 per cent cannot afford a mortgage with an 80 per cent loan-to-value.
• We are not building enough houses. Back in 2004, the Government was given the unenviable news that 120,000 new houses would be needed each year by economist Kate Barker. We currently face a shortfall of 150,000 homes built.
• People need mortgages but there aren’t many available unless you have an average of £30,000 for a deposit. Even then a rise in interest rates could spell disaster when it comes to keeping up with mortgage payments.

It’s a good blog but an ethical regulated PRS has much much more to recommend itself to the country, and I would have liked to have seen the NLA point out some of the killer advantages the PRS has over an owner-occupier society.

The driving force behind the 1988 Housing Act was a recognition that a house owning society was an immobile society. In the 1980s there was high unemployment, and many unfilled jobs – the government recognised to it’s frustration that the people weren’t where the jobs were. Even though the Thatcher Government is remembered for it’s “Right to Buy” privatisation of the Social housing sector, it’s Housing legacy is really the 1988 Housing Act which enabled the BTL revolution. The benefit for Society is mobility of labour, and flexibility of skill. Whilst the owner-occupier society faces a cost of £10,000 – £20,000 in order to move house to a different location for a job, or career advancement, a PRS society hands their notice in to their landlord at nil cost.

One of the foundation stones of a healthy economy is a healthy Private Rental Sector providing the labour force of the country with good quality affordable homes wherever they want them. That isn’t going to happen with a Government which is going to prioritise funding to home-owners, and do nothing to enable the building of new housing.

Yesterday may have been a grim day for Landlords, but as a consequence it was a very bad day for the economy and everyone else.