Help To Buy : WTF?

(That stands for ‘What The Flip‘, BTW…)

We don’t usually try and be particularly topical on this blog; mainly due to a lack of time in general, compounded by the difficulty of following stories as they develop, but I’m sure by now you have spotted various stories about one of the four government-backed home ownership schemes – of which Help to Buy is the one picking up the most headlines at the moment.

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Is it any good for me? Any good for wider society, the economy or the environment? Well, we can only scratch the surface of some of these deep seated housing market and land rights issues here, and have a good look at what various other sources are saying about it. Read on…

“Help to Buy” really consists of four schemes:

Help to Buy mortgage guarantees – You get a mortgage from a bank, up to 95% of the value of the property. The govt. provides a guarantee on this to the bank. Has to be less than £600k, can’t be a buy to let or second home. Don’t have to be a first time buyer.
Help to Buy equity loans – The govt. gives you a loan for 20% of the value of the property, which is interest free for 5 years and at a low rate after this. Either you sell the house and govt. takes back this 20%, or you buy them out yourself. Less than £600k, can’t be buy to let. Don’t have to be first time buyer.
Shared ownership – A ‘part buy – part rent’ scheme only through housing associations. The proportion you buy varies from 25-75%, and you can eventually buy the whole property. Your household must earn less than £60k, mainly for first time buyers but not strictly.
NewBuy – Buy a “new” home or a property being sold for the first time, with a 5% deposit, up to £500k, not second home or buy to let. Only from specific building companies, don’t have to be a first time buyer.

All of which are (arguably) aiming to do one or all of the following:

– Protect existing property prices
– Boost the construction and banking industry
– Reduce rents as people move on to ownership (particularly in ludicrously high rent areas)
– “Help the average Joe/Joelene achieve THE DREAM of home ownership”

But which may actually achieve one or all of the following:

– Keep the economy pumped up in the run up to an election, to collapse again later
– Offer loans to people who might be unable to manage later interest rate increases
– Favouring larger building companies over alternatives-  individuals or community trusts
– Continue the selling off of council house / housing association / social housing stock
– Continue THE DREAM of dedicating your life to a 30-40 year mortgage at the expense of, well, any other DREAMS you might have pursued with those 30-40 years.

So what does the rest of the world have to say about it? Here are three pieces worth a further read:

Help to buy should be called Help to vote – Simon Jenkins, Guardian
“Britons have come to expect politicians to help them step on to the ladder in their late 20s and early 30s. Germans, French and Japanese wait into their 40s, letting their savings fructify in the industrial economy. This is reflected in the figures. Home ownership comprises 43% of households in Germany and 70% in Britain. Just 17% of Britons rent privately, against 48% of Germans. This is some “Englishman’s castle”, merely the direct result of half a century of political bribery…subsidising home ownership is not just “a bias towards inflation and housing bubbles”, it leaves less money to help those in real housing need. It distorts the nation’s capital accumulation towards bricks and mortar. It hampers labour mobility, encourages mass commuting, and increases the divide between house inheritors and the poor. Because home ownership is the icon of the centre ground, Labour panders to it as much as the Tories.”

Help to buy is too good to turn down – James Coney, This is Money
“Between April and June this year fewer than 175,000 homes were sold in England and Wales. That’s about as high a level since the credit crunch began, but still a lower figure than at any time between mid-1995 and 2007…The Help to Buy scheme is an attempt to slap everyone out of this stupor by offering an incentive that is simply too good to turn down. I’m no great fan of taxpayers underwriting parts of the economy — such as with government homebuying schemes. Certainly, all those attempted in the recent past have been pretty disastrous, leaving many buyers with homes they cannot move out of, and debts they can’t pay off…A recent report from the Office for National Statistics confirmed that predictions of a national property price bubble were not being realised…Much of the rise in prices is being driven by London. Outside of the capital, every other region — except for the South-East — is growing by less than 2.5 per cent a year…This may change, of course. Reports that some brokers are preparing to work round the clock, and banks will open late for desperate buyers, concern me a little. It smacks of the frenzy that engulfed Mrs Thatcher’s Right to Buy scheme — and resulted in some firms setting up shop in camper vans parked by council flats.”

Safe as houses? – Editorial, The Independant
“The Chancellor’s aim is obvious. Not only might a new cadre of grateful homeowners vote Tory in 2015; higher prices will render the property-owning class as a whole more kindly disposed towards Mr Osborne’s party. The problem is that the Chancellor is creating the illusion of recovery by giving the addict more drugs. Lacklustre prices are an unavoidable, even healthy, consequence of the debt-fuelled boom that went before. Nor is his latest concession convincing. It is fine for the Bank of England to be charged with ensuring that the market is not over-heating. But an annual review – and the first of them not until September – is insufficient…The Chancellor is still approaching the issue back to front, politics ahead of economics. Britain needs more houses not more buyers.”

 

In conclusion, while it isn’t our mission to come to any particular stance on any particular policies, the signs from this are not really great for the types of small scale, environmentally sensitive, potentially community owned types of project we often feature on this blog.

Imagine what else could have been achieved with this level of political focus – reusing sprawling infill and brownfield sites, repopulating city centres, even just keeping something like Feed-in tariffs propped up a bit more to encourage more small scale energy production. Suggesting we need 250,000 new homes built a year, when a million or more are sitting empty to begin with. Instead we will have increased pressure on existing marginal land from bigger developers wanting to cash in on a mad rush of people who are convinced home ownership (of an overpriced, under-finished) is somehow their right. Only to be made redundant next week and kicked back out onto the 2 million strong council house waiting list.

Hey, if it works for you, I wish you the best of luck of course, but LESSBIG will keep looking for alternatives in the meantime.

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