Coalition plans new housing stimulus

Graham_Devon

I wrote this comment on the funding for lending thread a few days back:

Apparently, and this was on the radio, so I have no evidence, a new scheme is already being planned by the government in response to unintended use of funding for lending. The information comes after Mervyn King stated the scheme could be abused, and now the paper has been released showing how it's being used by the major banks.

It appears the rumours were indeed true and the coalition is planning a new scheme to stimulate the housing sector.

I'm not quite sure what to make of this new scheme, and I'm not quite sure if it would do anything to provide more housebuilding.

In a nutshell the proposals are:

- To release private companies from having to build a certain percentage affordable housing on their sites.

- To use the governments balance sheet to underwrite bonds to provide funding to housing associations to build affordable housing, using the firstbuy and newbuy schemes (will probably be a new, though similar scheme)

- The possibility of land auctions (presumably government land?)

So, it seems to me, the construction companies will continue to focus on 3/4 bed homes, as they are currently profitable for them. The housing associations will get bonds underwritten by the government to provide the housing the private companies currently won't, and the private companies may be able to grab even more land?

May be the cynic in me...but I'm wondering what on earth any of this does to provide stimulus....all seems to provide large gains for the house building companies, with little gain for either new buyers or anyone else? Apparently the construction industry is stating to the government that they have to make housing more accesible as there is no point building houses people can't get funding to buy, therefore, they must make use of newbuy schemes, but lower the amount required to take part in these schemes for the buyer. (Presumably this means selling less of the house to the buyer?)

http://www.ft.com/cms/s/0/e654f184-e53f-11e1-b758-00144feab49a.html#axzz23YYfNCVy

Either way, the schemes are coming through thick and fast.

CLAPTON

more house building creates more houses for real people to live in and so reduces the pressure on prices and provide noce homes for families.

it employs people who are currently unemployed which will cause a stimulous to the economy so creating more jobs

getting rid of the 'affordable house' scam is excellent news as this will reduce the price of the houses and make them more sellable

sadly they plan to use unaccountable and corrupt housing associations but that's a price worth paying at the moment

if they build 3/4 houses (which are in short supply and are good for families) then that will free up 2/3 bed properties as people move to the 3/4 bed houses and then that will in turn free up 1/2 bed properites as people move to the 2/3 bed properties

a win win situation for everyone

but I'm sure it will in fact be a damp squib as rules and regs will prevent the important bits being done.

Loughton_Monkey

Graham_Devon wrote: »

......May be the cynic in me...but I'm wondering what on earth any of this does to provide stimulus....all seems to provide large gains for the house building companies, with little gain for either new buyers or anyone else?...

If you want to stimulate any market, then surely the producers of those goods must be involved? Can't expect any producer to work at a loss, and a 'market economy' always prevents profits being excessive. Letting more land come on the market, and allowing builders to build what's 'demanded' rather than poke in a few 'Nelson Mandella' hovels for the riff-raff next door to [otherwise] attractive properties will surely get them moving again.

So-called "affordable" housing is a red herring. It is an extremely vague term, and undefined in any meaningful way. Private Builders have, for years, successfully chosen to build "starter homes" as well as so-called "executive" homes, depending upon the local market. These, together with the existing housing stock, can easily provide all the 'starter homes' for which there is a demand.

These houses are "affordable" by any normal definition. The mortgage rate is "affordable" in trumps these days! The only thing that is not 'affordable', currently, is the deposit. Those who are unwilling or unable to save for a sensible deposit do not belong in the house-owning community. It just takes time, that's all.

As for those genuinely unable to get onto the private ladder, or are simply unable to manage their finances need so-called 'social housing' to rent. I thought that Councils and Housing Associations exist for that purpose. And if public money 'guarantees' are provided, then it's simply a matter of these people get off their back sides and doing what they exist for. If they can't, or won't, then let them all go bust and pass the baton onto more capable people.

There is a healthy subset of people simply recognising the housing market as it is, avidly saving for the deposit, getting the mortgage, buying, and moving in - to a 'starter' home. They will be richly rewarded. But the Blair/Brown (and prior) years have bred the biggest community of whingers I have ever seen who want a 3-bed, and it must be in a good area, and I demand it now. We're in a recession and have more concerns, as a nation, than wet-nursing adults who behave more like spoilt children every day.

Time for bed....

If I stay up any later, I might start getting grumpy....

PaulF81

Thank god I may be able to buy a decent house on a new build estate without the threat of Wayne and waynetta slob moving in next doors enforced social housing.

Graham_Devon

PaulF81 wrote: »

Thank god I may be able to buy a decent house on a new build estate without the threat of Wayne and waynetta slob moving in next doors enforced social housing.

The houses will still be mixed, just the private companies won't own the lower end houses. They will likely build them still, on contract for the HA .

wymondham

The best housing policy they could come up with is ....... to do absolutely nothing - stop all schemes/incentives etc and do nothing. That way the market will then work again and things will find their own level.

CLAPTON

wymondham wrote: »

The best housing policy they could come up with is ....... to do absolutely nothing - stop all schemes/incentives etc and do nothing. That way the market will then work again and things will find their own level.

that isn't possible as we have planning laws which restrict supply.
also we need to scrap the 'affordable housing requirement as it makes affordable houses unaffordable.

Generali

wymondham wrote: »

The best housing policy they could come up with is ....... to do absolutely nothing - stop all schemes/incentives etc and do nothing. That way the market will then work again and things will find their own level.

That seems to me what this scheme entails, at least to a greater extent than previously. I suspect that the problem is going to remain that people will fight tooth and claw to prevent new houses from being built because of this ridiculous notion that either the UK had countryside or the whole of the South East is covered in concrete and there can never be any position between those.

Unless planning is made much easier, probably with a presumption of it being granted except in highly unusual circumstances, this policy will die a death by 1,000 planning departments.

Wookster

Loughton_Monkey wrote: »

These houses are "affordable" by any normal definition. The mortgage rate is "affordable" in trumps these days! The only thing that is not 'affordable', currently, is the deposit. Those who are unwilling or unable to save for a sensible deposit do not belong in the house-owning community.

The only reason housing is affordable at the moment is because interest rates are at an all time low. If interest rates were at their average then property wouldn't be quite so affordable after all.

FTBFun

Wookster wrote: »

The only reason housing is affordable at the moment is because interest rates are at an all time low. If interest rates were at their average then property wouldn't be quite so affordable after all.

There's no chance those going up though until the rest of the economy improves.

Wookster

FTBFun wrote: »

There's no chance those going up though until the rest of the economy improves.

There's something of a trap here:

Interest rates go up -> defaults rise -> confidence & spending falls -> economy slows -> Interest rates go down?

I'd be interested to here Generali's thoughts on the dangers of creating an economy dependant on historically low interest rates.