Jim Armitage: Meddling governments don't help on housing
Jim Armitage is the City editor of The Independent and London Evening Standard group of newspapers. He has been a reporter and editor for more than 20 years and was recently shortlisted for the Press Gazette financial journalist of the year and The Society of Editors financial journalist of the year awards. He contributes news, investigative reports and comment to the Independent titles plus a daily column in the Evening Standard.
Thursday 10 October 2013
Outlook Successive governments, no matter how libertarian, always interfere in the housing market.
This would be no bad thing if they did so intelligently. So, for decades in which we have had a chronic shortage of housing, particularly at the cheaper end of the spectrum, we should have invested taxpayers' money directly in schemes to build more affordable, or council-owned properties.
Instead, governments prefer less-direct routes with their meddling, nudging the demand side of the equation with projects like Help to Buy in the hope that supply – in the form of more housebuilding – will follow suit with funding from the private sector.
Harry Clifton, a reader with a sizeable property agency in London – Benthorp – gets in touch with memories of a previous time such clever-clever tinkering was tried. Miras – mortgage interest relief at source – was intended to encourage folks to take out mortgages in the 1980s and give the property market a boost. It was especially helpful for couples who could each claim tax relief on their earnings when they jointly bought a home.
It certainly gave the property market a boost, helping fuel a huge rise in house prices. But what really made the bubble grow was when, in his Budget of 1988, Nigel Lawson signalled that he would be closing off the perk that August. Buyers predictably stampeded into the market, frenetically outbidding each other to beat the deadline. The entirely predictable result was an unprecedented spike in house prices. That was followed, as soon as the deadline passed, by a miserable crash and years of stagnation.
Even Mr Lawson subsequently admitted telegraphing the end of double Miras relief months in advance was a mistake, as it contributed to the boom and bust.
Help to Buy is constructed in a similar, finite way, with a figure of £12bn of guarantees available for three years.
So, fast forward two and a half years and £11.5bn from now (conveniently after the General Election) and take a guess: what happens next?
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