Ensuring a fair housing market for all

Source: DCLG
Published Wednesday, 3 September, 2008 - 12:50

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 A major cross-government package of new measures to meet current challenges in the housing market was announced today.

A £1 billion housing package announced by Communities Secretary Hazel Blears will help first time buyers struggling to get onto the housing ladder, support vulnerable homeowners at risk of repossession, and support the house-building industry.

The Chancellor of the Exchequer has also today announced that stamp duty land tax will not apply to purchases of residential property of £175,000 or less.

In a third step, the Department for Work and Pensions (DWP) announced new support measures to help vulnerable homeowners meet their mortgage interest payments. The DWP announced it would be reforming Income Support for Mortgage Interest by shortening the waiting period before SMI is paid from 39 weeks to 13 weeks for new working age claims from April 2009. The capital limit for new working age claims will also be increased to £175,000 from April 2009.

The measures announced by Ms Blears, which are the next steps of an on-going programme of action to support the housing market in England, include:

* Offering 10,000 first time buyers currently frozen out of the mortgage market the chance to get onto the property ladder through a new £300m shared equity scheme;

* Supporting up to 6,000 of the most vulnerable homeowners facing repossession to remain in their home through a £200m mortgage rescue scheme;

* £100m investment to support SMI reform which could help prevent a further 10,000 repossessions;

* A £400 million boost in spending power for social housing providers, including registered social landlords and councils, to deliver 5,500 more social houses over the next 18 months by bringing funding forward;

* Working with Regional Development Agencies to support the most critical regeneration schemes with the most potential to transform their communities.

Communities Secretary Hazel Blears said:

"This Government is committed to practical action to help those most affected by the current state of the housing market. We are working to make sure everyone struggling to pay the mortgage gets support and advice. We are giving a leg-up to first-time buyers keen to own a place of their own. And by bringing forward our investment in social housing, we are both getting more decent, affordable housing ready for people to live in sooner, and helping the house building industry weather tough times."

Housing Minister Caroline Flint added:

"We are determined to continue to do everything possible to promote long- term stability and fairness in the housing market. The measures announced today will go significantly further in supporting families who may be facing difficulties at the moment, while ensuring we maintain our focus on delivering more affordable homes over the long term. We must ensure that repossession is only ever a last resort. The Government is determined to play its part, and others must do the same. Lenders should be exhausting all avenues before repossessing, including looking at how they could extend mortgage rescue schemes to householders."

Minister for Welfare Reform, Stephen Timms, said:

"Our reforms to SMI payments will simplify the system and make it easier for people who are eligible to claim. We will also increase the capital limit for new working age claims to take into account the value of people's homes today. The improved financial help that SMI provides will assist eligible homeowners with their mortgage interest payments should they get into difficulties."

The Government has been taking a pro-active response in addressing the current challenges in the housing market, including making funding available to buy unsold homes off the market, increasing shared equity support for first time buyers, expanding free legal representation in county courts for households at risk of repossession, and providing more debt advice.

We have also strengthened the role of councils by establishing the first Local Authority Housing Companies, giving local authorities a greater say and role in building new affordable housing. 

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my assessment of these measures

Thu, 1970-01-01 01:00

Dux, Director, Canal Lane
In the housing market area, I contend that it is the proper duty of government to influence behaviours so that the market behaves ethically and prudently and that risks to house purchasers are kept under review. When I bought my first house, in the early 70s, I was grilled hard about my earning capability and I had to provide proof of income in order to obtain a mortgage of three times my salary. I witnessed first-hand the control of money supply. Had more money being available, sellers would have sensed that and I would have had to pay more. In my case that would have kept me out of the housing market for a bit longer. That tougher building society manager actually did me a big favour as in the first six months of having my mortgage, my monthly payments went up by 120% due to interest-rate changes. Think about a thing like that these days! There is a very real sense in which the purchase of one’s first house is one’s most critical activity in the house purchasing area as inevitably it sets the scene for what will follow. Once one has one’s first house and they few years have gone by one then has some equity that will always open the door to new mortgages when one has to move house. For a long time now controls on the money supply for house purchase have been seriously and palpably inadequate. This has been plain to all. House prices have risen and risen, which has meant that the only way to attempt to buy one’s first home was to decide to jump onto an accelerating train. The government (and here I include earlier ones too) really could have done a lot more over a long period of time to better manage money supply into the housing sector in this country. It has to be indicted for protracted and wilful negligence over this. Mortgage providers were not carrying out proper checks into customer’s ability to earn and furthermore they were allowed to raise funds on the strength of mysterious financial objects, many of which have proved essentially worthless. And they were allowed to continue gettng away with it. While the measures announced by the government to contain some good, some of them directly interfere with the operation of the market, which I think is wrong. I single out the provision of money to help first-time buyers by their first house: this just helps to maintain artificial price inflation; support for the house-building industry is just not needed: it is a private sector activity which has shareholders who bear this responsibility. After all, do taxpayers benefit when they are making a lot of money? The adjustments to stamp duty land tax (which I believe are only temporary) are very wrong indeed: they will just create financially perverse short-term behaviour centred around the £175,000 threshold. I would much prefer to have seen the government tighten up the arrangements for controlling the size of loan that can be given to purchasers relative to their income. It is vital that there be some margin of safety here: this will make life easier for house purchases and keep house prices that little bit lower too (because it would act as a throttle upon money supply). Another thing that the government definitely should do is to set acceptable parameters on the nature of the so-called “products” of the money lending industry. By this I mean that there should be sensible bounds on the charges made to people with mortgages when they want to effect changes such as paying off the mortgage early or affecting a restructuring. For a long time now the money lenders have had a great deal of power in this area and they have frequently abused it. Regarding stamp duty: it should be done away with to an extent that only rich-list people should pay it. It discourages both labour mobility as well as the relinquishment of larger houses by older people once their children have left home. It is our modern day window tax. So my message to the government is: stop meddling – start influencing and start at the money supply end!