The Big Question: How should we deal with the crisis over affordable housing?

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The Independent Online

Why are we asking this question now?

Because alarm bells are ringing in Downing Street over the shortage of low-cost homes and the problem that young people face in getting a foothold on the property ladder. Boosting the supply of low-cost homes will therefore be a key feature of Gordon Brown's programme for his first year as Prime Minister, which he will outline to the Commons today.

Why has housing shot up the agenda?

Tony Blair had a blind spot on the issue of affordable housing, which was a surprise given his usual sensitivity to the issues that preoccupied the voters. Gordon Brown has made it clear he will not make the same mistake and has made housing one of his priorities for government. He underlined that by giving the Housing Minister the right, for the first time, to attend Cabinet meetings.

Jon Cruddas, the MP for Dagenham, also forced the subject on to the agenda during Labour's deputy leadership campaign, describing it as the biggest issue facing Britain and arguing that the shortage of affordable homes was inflaming community tensions in multi-cultural areas such as his east London constituency.

It must also have occurred to Ministers that although middle-class voters might be happy with the soaring values of their houses they will also be increasingly alarmed at how difficult is for their children to buy homes of their own. At a time when they expect to be enjoying a comfortable retirement, growing numbers are being forced to contribute towards their children's mortgages.

How serious is the problem?

Extremely serious - and worsening by the month as the gap between the cost of a mortgage and household incomes continues to widen. The Council of Mortgage Lenders said yesterday that during May the average first-time buyer now needed to borrow a record 3.37 times their income to afford a home.

Mortgage interest payments now eat up around one-fifth of a new homeowner's monthly pay, the highest level for 15 years and double the rate a decade ago. The figures will continue rising as two recent interest rate increases are still to have an impact on monthly repayments.

The problem is at its most acute in London, where mortgage payments account for more than one-quarter of income, but is still being felt in almost every part of the country. Desperate buyers are being forced to take out mortgages at five, six or even seven times their salary, with inevitable knock-on effects as family struggle to cope with the cost of borrowing.

Shelter, the housing charity, calculates that problems with mortgage arrears and repossession have doubled in the last two years. Adam Sampson, its chief executive, says: "Having been Chancellor, Mr Brown plainly understands the housing market is a major driver for the country's economic health. But he must also know that vast individual debt is now being carried by people as a direct result of people borrowing against the value of their property."

How did we get into this situation?

Housing policy reached a turning-point in 1980 when the Thatcher government gave council tenants the right to buy their homes at a discount. Labour initially opposed the sales but soon dropped its resistance to such a popular policy and more than 1.7 million people have taken advantage of the scheme over the last 27 years. But councils - which face tough restrictions on spending - and housing associations have only built 700,000 properties to replace the lost housing stock over that period. Nor are private builders, who deliver 90 per cent of new homes, keeping pace with demand, with 160,000 homes constructed last year, compared with the 223,000 that the country is thought to need.

Social trends have also ratcheted up the pressure on the country's housing stock. People are living longer, young adults leave the family home at a younger age, single occupancy households are on the increase, and high levels of immigration in recent years have also added to the problem.

What is the solution?

With 70 per cent of adults owning their own home, but 84 per cent saying they would like to, Gordon Brown's aim is to close the gap between aspiration and reality. A housing green paper due shortly is expected to loosen the controls on council house construction by local authorities.

The emphasis would be on a mixture of family homes and flats, which could be offered on a range of terms including shared equity, which would allow young adults to pay part-rent and part-mortgage. Reform of the mortgage system will be proposed by the Government because of concern that lenders were offering only shorter-term mortgages so they could repeatedly charge high arrangement fees.

Alistair Darling, the Chancellor, this week proposed that lenders should offer buyers fixed-rate home loans for periods of up to 25 years. Such a move would bring more stability to the housing market, allowing borrowers to plan over a long period and to be insulated from fluctuations in interest rates. Ministers will streamline the planning system to remove some of the bureaucratic obstacles to house building and free up more land for development.

David Cameron has also singled out the issue as a priority for an incoming Conservative government. He told last year's Tory conference that it was "our social responsibility" to build more homes for young people.

Yesterday's Tory review of social policy backed the extension of right-to-buy, rent-to-own and shared equity schemes for first-time buyers.

The Home Builders' Federation is calling for government help for private developers to build more low-cost houses. Paul Pedley, the chairman of its affordable housing policy group, said: "Young people do not want a black-and-white choice between social housing and private housing they cannot afford to buy. Most want to get on to the home ownership ladder by accessing affordably priced market housing."

How can we square house-building with the environment?

For all ministers' promises to promote eco-friendly construction schemes, it can't. The best that can be hoped for it that the environmental impact will be minimised.

Some new homes can be developed on brownfield sites in towns and cities, but the reality is that the greatest pressures are in the semi-rural areas around the major conurbations, with fields disappearing under concrete and tarmac. Mr Darling has said he is determined to protect the nation's heritage, but warns: "If we don't increase the supply of houses, the problem will just get worse."

Hazel Blears, the Communities Secretary, yesterday predicted forthcoming battles over house-building, refusing to rule out redrawing the map of the green belt. She told MPs: "I think we are going to have a tussle... because some people are concerned about environmental issues. But I think the priority has to be to build these homes."

Planners will have had a recent reminder of the environmental risks of rapid house-building as many of the most attractive sites for developers are on flood plains.

Will the problem get worse before it gets better?

Yes...

* Although interest rates have begun to rise, there's no shortage of buyers and demand for houses remains high

* Any major house-building scheme will take years to have an impact

* Ministers might fight shy of a confrontation with the environmental lobby

No...

* Unlike his predecessor, Gordon Brown appears determined to take radical action on housing, and quickly

* Under new government measures, local councils will soon be given extra freedom to build homes

* History suggests that house price momentum is not constant, and that the current rate cannot be maintained indefinitely

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