Julian Knight: The road to housing hell is littered with good intentions
Sunday 18 May 2008
I am a techno clot but still love digital cameras. You can take snaps anywhere you like and then it's a cinch (even for me) to download them on to a laptop, blow them up and email them to all and sundry.
Last week, an enterprising snapper used one to take a picture of housing minister Caroline Flint's notes as she entered 10 Downing Street for a Cabinet meeting on the worsening UK housing market.
The contents made several front pages but were hardly earth-shattering. House prices could fall by 5 to 10 per cent in the next year, it was revealed, and the Government doesn't know "how bad it will get". Ms Flint's officials must have really burnt the midnight oil thinking those lines up.
It's what our rulers plan to do about this, as outlined in Gordon Brown's proto-Queen's Speech last week, that provides the real food for thought.
In short, the Government wants to help those on lower incomes on to the housing ladder. This is a very worthy objective: there is a whole generation of people who may never be able to afford their own home, and that isn't fair. No matter how much you hear about the advantages of renting and how we should be more like the French or Germans (where whole families are perfectly happy to rent for generations), I, like most Britons, have a gut feeling that it's simply better for the soul to own a place rather than to rent.
The Government's wheeze for getting more people on to the ladder is to loosen the criteria of the shared-ownership schemes run by housing associations. Under these initiatives, people begin by buying a part-share in a house and renting the remainder; over time, they can then expand their stake. The change now is that applicants for shared ownership will no longer have to be, in that buzz phrase of New Labour, "key workers". In other words, they won't have to be in the public sector.
I've always thought it unfair that someone who has chosen a career in the public sector – which enjoys better pensions and job security than the rest of us – should also have a great big leg-up on to the property ladder when some other people, who may be worse off, don't get any help. A levelling of the playing field is welcome.
But there is a big problem here. This isn't the right time to be propelling people who really can't afford to buy into a housing market which is crumbling by the day. The property in which they purchase a stake could be worth 25 per cent less, or maybe even worse, in a couple of years' time.
Along the same lines, the Government says it wants mortgage companies to ease their lending criteria for first-time buyers, so encouraging more to take the plunge. But just like Ms Flint, lenders don't know how bad the housing market is going to get – and they want borrowers to have a buffer against negative equity. The Government, then, risks throwing lots of people into the fire. It's far better to wait for the market to correct itself, and then to help low-income groups.
Boost for pensions
A more welcome development was the news last Friday that the EU has confirmed the legality of auto-enrolment into workplace pension schemes. For too long now, the inertia of employees has meant they have missed out on pension saving and any employer contributions. When staff are automatically enrolled into their workplace scheme, 90 per cent stay put and make regular contributions. But when workers have to opt in, the take-up rate falls to around 50 per cent.
More auto-enrolment won't solve the retirement savings crisis, but it will ease it.
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