Mary Ann Sieghart: Lower house prices are just what the country needs

Ministers privately hope that prices will fall, but are terrified of saying so in public

Share

All I want is a room somewhere ..." Young people all over Britain are echoing Eliza Doolittle's lament. If it isn't bad enough that more than a million of them are unemployed, they're also finding it extortionate to rent and almost impossible to buy a home. So the Government's long-awaited housing strategy, to be unveiled today,had better be good.

Both parties in the Coalition are sensitive about creating a "lost generation" of young people who've worked hard through school and college and still can't find a job or a home at the end of it. Nick Clegg and Iain Duncan Smith are working closely on youth unemployment. And Clegg joins David Cameron today to launch the housing initiative.

It is based on the premise that there's currently a constraint both on the supply of homes and the demand for them. At least there's plenty of demand, but potential buyers can't afford the deposit needed to get a mortgage. The strategy aims both to increase the supply – by getting more homes built and bringing empty ones back into use – and to help buyers who can't lean on their parents to raise a deposit.

It starts at the bottom. Ministers have been aghast to discover the extent of fraud and abuse in council housing – costing the taxpayer between £5bn and £10bn a year, and using up homes that could be offered to people in need. Astonishingly, subletting a council property is not even a criminal offence. And people who already own a home are still allowed to apply for council housing. So they can pay a subsidised rent and rent out their own home at commercial rates, or live at home and let out their council property. Today's strategy will propose making subletting illegal and preventing home-owners from renting council houses.

It will also, for new tenants, offer shorter tenures. At the moment, you can be given a council house when you are young, hold on to it for the rest of your life, whatever your circumstances, and even hand it on to your children. It's one of the few examples of the hereditary principle outside the House of Lords. The Government will recommend that tenants' needs are periodically reassessed and if they're earning more money or need fewer bedrooms, they should either move out or pay more to stay. Expect lots of tabloid stories about council tenants with six-figure salaries: the bed-blockers of our day.

We've already heard about the bigger discounts council tenants will get if they want to buy their homes. But ministers are also planning to give some away for free. There are about 750,000 empty homes in England – whole streets of boarded-up houses in some northern cities. Rather than pull them down and redevelop, ministers want to hand over the keys to people who undertake to refurbish them. Social enterprises will be encouraged to train homeless people so that they can do up a place in which to live and make themselves more employable at the same time. The Government has earmarked more than £100m to bring empty homes into use.

As well as a £400m Get Britain Building fund to drive housebuilders to develop their existing land banks, government departments have been asked to find public land that could be used for housebuilding. Just five departments have between them come up with enough land almost to meet the 100,000-home target. With land from other departments and from quangos such as Royal Mail and Network Rail, the Government hopes to end up with about 150,000 new homes. Developers won't have to pay for the land until they have built and sold, or rented, the properties, which should help to get work started now, when the economy badly needs the boost.

Ministers also hope that innovative tax changes will encourage institutional investors like pension funds to put money into the private rental market. At the moment, only 1 per cent of the UK's private residential stock is owned by institutions, compared with 10-15 per cent in most European countries. It would be good to create a reliable private rented sector, with responsible landlords, for the 14 per cent of us who genuinely want to rent.

But that still leaves 86 per cent who prefer to buy. And the hurdles are huge. According to the Resolution Foundation, the average low- to middle-income household putting aside 5 per cent of their disposable income each year would have taken 31 years to save a deposit in 2010, up from just eight years in 1983. In London, it would be 54 years.

The Government is desperate to see deposits come back down to 5 or 10 per cent, rather than the 20 per cent currently demanded by mortgage providers. Lenders, though, are reluctant to take that risk, as it would take just a small fall in house prices to make the security of the property worth less than the value of the loan. They want the reassurance of a government guarantee.

That's what's going to be announced today. Although this could get the housing market moving again faster than any other measure, it is also fraught with risk. After all, it was sub-prime mortgages that caused the financial crisis in the first place. At a time when job insecurity has never been higher, and defaults more likely, this is dangerous territory for the Government. When Gordon Brown mooted a state-backed mortgage scheme in 2008, the Governor of the Bank of England, Sir Mervyn King, reportedly threatened to resign.

What would help most of all would be a sustained fall in house prices. Both buying and renting would become more affordable. And it would barely affect existing home-owners unless they have bought very recently and are in danger of negative equity. For all other owner-occupiers, it makes trading up cheaper and trading down less lucrative. But moving to a house of equivalent value is the same whatever your property is worth.

Ministers privately hope that the increased supply they are creating will bring prices down. But they are terrified of coming out publicly for fear of what the Daily Mail would say. In this, as in so many other areas though, the Mail has got it wrong. Most owner-occupiers these days have children or grandchildren. They worry about the young's chances of ever getting on the housing ladder. And they don't particularly fancy remortgaging their own house to pay for the next generation's deposits.

The one thing missing from today's housing strategy will be an outright acknowledgment that lower house prices would be a good thing. It's still too much of a political taboo. But ministers know that it's exactly what the younger generation need. So do prospective buyers and their parents. In the immortal words of Eliza: "Wouldn't it be loverly?

m.sieghart@independent.co.uk / twitter.com/MASieghart

React Now

iJobs Job Widget
iJobs General

Online Advertising Account Executive , St Pauls , London

£26K-30k + Bonus, Private Medical Insurance, Company Pension: Charter Selectio...

Advertising Account Executive - Online, Central London

£25K-28k + Bonus, Private Medical Insurance, Company Pension: Charter Selectio...

Senior Infrastructure Consultant

£50000 - £65000 Per Annum potentially flexible for the right candidate: Clearw...

Public Sector Audit - Bristol

£38000 per annum + Benefits: Pro-Recruitment Group: Do you have experience of ...

Day In a Page

Read Next
 

i Editor's Letter: Wages are on the rise (so long as you skew the figures)

Oliver Duff Oliver Duff
 

It’s two decades since ‘education, education, education’, but still Britain’s primary school admissions are a farce

Jane Merrick
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit
Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics

Is sexual harassment a fact of gay life?

Westminster is awash with tales of young men being sexually harassed - but it's far from being just a problem in politics
Moshi Monster creator Michael Acton Smith: The man behind a British success story

Moshi Monster creator Michael Acton Smith

Acton Smith launched a world of virtual creatures who took the real world by storm
Kim Jong-un's haircut: The Independent heads to Ealing to try out the dictator's do

Our journalist tries out Kim Jong-un's haircut

The North Korean embassy in London complained when M&M Hair Academy used Kim Jong-un's image in the window. Curious, Guy Pewsey heads to the hair salon and surrenders to the clippers
A History of the First World War in 100 moments: A forgotten naval victory in which even Nature played a part

A History of the First World War in 100 moments

A forgotten naval victory in which even Nature played a part
Vespa rides on with launch of Primavera: Iconic Italian scooter still revving up millions of sales

Vespa rides on with launch of the Primavera

The Vespa has been a style icon since the 1950s and the release this month of its latest model confirms it has lost little of its lustre
Record Store Day: Independent music shops can offer a tempting alternative to downloads

Record Store Day celebrates independent music shops

This Saturday sees a host of events around the country to champion the sellers of well-grooved wax
Taunton's policy of putting philosophy at heart of its curriculum is one of secrets of its success

Education: Secret of Taunton's success

Taunton School, in Somerset, is one of the country's leading independent schools, says Richard Garner
10 best smartphones

10 best smartphones

With a number of new smartphones on the market, we round up the best around, including some more established models
Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

Mickey Arthur: Aussie tells ECB to stick with Ashley Giles

The former Australia coach on why England must keep to Plan A, about his shock at their collapse Down Under, why he sent players home from India and the agonies of losing his job
Homelessness: Why is the supported lodgings lifeline under threat?

Why is the supported lodgings lifeline under threat?

Zubairi Sentongo swapped poverty in Uganda for homelessness in Britain. But a YMCA scheme connected him with a couple offering warmth and shelter
A History of the First World War in 100 Moments: When the world’s biggest shed took over Regent’s Park

A History of the First World War in 100 Moments

When the world’s biggest shed took over Regent’s Park
The pain of IVF

The pain of IVF

As an Italian woman vows to keep the babies from someone else’s eggs, Julian Baggini ponders how the reality of childbirth is often messier than the natural ideal