Gordon Brown has started his new role as Prime Minister with a flurry of new legislation and initiatives in order to negate the threat of the populist Conservative leader, David Cameron.
One of the most prominent initiatives launched by the Brown Government is a green paper which proposes solutions to Britain’s unique housing problem. The relentless rise in UK house prices has caused a serious lack of affordable housing and even high-earning graduates are finding it hard to get on the property ladder.
The green paper outlines three major areas the Government will focus on:
- Increasing the housing supply – building more houses and incentives for councils and developers to build more homes.
- More affordable homes – more social housing projects and a Government shared equity scheme.
- Greener, better-designed homes – building five new ‘eco-towns’ and reducing the carbon output of new homes, as well as protecting the green belt.
Commenting on the green paper, Housing Minister Yvette Cooper, says: “Unless we act now, by 2026 first time buyers will find average house prices are ten times their salary. That could lead to real social inequality and injustice,
“Every part of the country needs more affordable homes – in the North and the South, in urban and rural communities.”
The Chartered Institute of Housing has welcomed the green paper as a major step forward in creating social housing.
David Butler, director of CIH, says: “The scale of the crisis is such that no one solution will be sufficient so I’m also pleased to see a role for local authorities and Arms Length Management Organisations (ALMOs) in providing much-needed new homes – and a suggestion that the Government will look futher at the buy-to-let and particularly problematic buy-to-leave-empty markets.”
However, the Conservatives have expressed concern that more homes will be built on flood plains, an area of particular concern after heavy flooding across the UK.
Grant Shapps, Shadow Minister for Housing, says: “We need to build more homes, but they must stand the test of time and be homes that families will actually want to live in. Yet Labour’s Whitehall planning targets, imposed on local communities with the threat of financial penalties on top, threaten to increase the likelihood of flooding.”
Adrian Kidd, an IFA with Mint Financial Services, thinks that the increase in housing stock is a good initiative, but will not keep up with demand, and also thinks that lenders should exercise prudence in the social housing sphere.
Kidd says: “Some lenders are on board with Brown, which is good, but we must stress the importance of prudent lending on social housing. Lenders must make sure they tighten their lending criteria or we could end up with a sub-prime problem like that in the US.”
Kidd’s concerns are likely to be fresh in the minds of mortgage lenders and intermediaries after the FSA’s recent sub-prime investigation and it may be necessary for the FSA to become involved in the proposals and regulate lending on social housing schemes.
Generally, however, there is a lot of support for a renewed social housing drive as a way of ensuring that the poorest are not priced out of the housing market.
Jull Craig, head of public policy at the Royal Institute of Chartered Surveyors, says: “RICS welcomes the decision to build more affordable shared equity and shared ownership homes. The decline in government sponsored housing over the last twenty years is a hugely significant factor in the affordability crisis for those most in need.
“In 1980, 94,000 houses of this nature were build in England compared to 21,000 last year. It is astonishing that the Government hasn’t moved before to tackle this crisis.”
There is no denying that Gordon Brown has a tough job on his hands to try to end the unrelenting rise in house prices. In the short-term first time buyers will continue to find it difficult to gain a foot on the property ladder and if the measures announced are not enough then the average Englishman’s home may be someone else’s castle.
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"When Blair was Prime Minister he kept banging on about the economy and then scoffing at the idea that the Tories left them the strong economy claiming it as all New Labour's doing.
Let us look at how this "Strong Economy" came about. It was often repeated by Labour that interest rates went up to 15% under the Tories but that was only for one hour in an attempt to save the pound in the ERM debacle that Labour was in favour of joining at that time. When we came out of the ERM, interest rates went down over time to 5%. Under Labour, Bank Base is up to 5.75% now and rising.
Labour inherited a golden legacy but stuck to the Tories spending plans for 3 years starving the country of building new houses. Consequently with low interest rates and house shortages, prices rocketed. We, (the public) lost faith in pensions due to Labour taxation of funds and making pensions part of the profit and loss account, so we looked to property for our retirement fund and house prices went up again. We then used the increased equity in our property to buy goods.
The balance of payment deficit is the largest ever. (For those who are old enough to remember as it is no longer reported). Chancellors in the past would have resigned for a deficit so large, Harold Wilson did. Therefore, it is not exports that have kept the economy strong, but the internal market on borrowed money which was probably intentional by the current Prime Minister when he was Chancellor. Debt is now well over £1 Trillion, the largest ever and house prices are now beginning fall due to the increase in BBR. We have record bankruptcies and getting worse.
Brown said at the time when he announced massive increases in spending that he could fund it out of taxes with more people at work. Well what is beginning to happen as I predicted 2 years ago that if the great British Public cannot borrow any more money they will stop spending and with no export market to fall back on, companies will start cutting back and there will be redundancies and even more bankrupts.
We are now heading for what Brown has been taunting the Tories over, “Boom and Bust” and what a bust! With tax revenues falling, they will fail to fill the black hole they caused by over spending. No matter what Brown blustered, taxes will have to increase." Richard Mission, mortgage and insurance broker, Richard Mission Financial ServicesIFAonline
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