Leading article: Don't try to buck the housing market

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The Independent Online

Anyone who has lived through previous ups and downs in the housing market will find nothing surprising about the pain that housebuilders such as Taylor Wimpey are feeling at the moment. Until this year, it was an unsustainable bubble. Construction firms were always going to be in the blast zone when it inevitably burst.

But to historians, there will also be nothing surprising about the fact that these companies are now lobbying for state help to deal with the fallout. The directors of these construction companies know ministers are as nervous as they are about declining house prices. Such special pleading should, though, be ignored. These housebuilders are private companies that speculated and over-expanded recklessly in the boom. If they are rescued from the consequences of their decisions now, they will have no incentive to behave more wisely in future.

Yet that is not to say ministers should be entirely inactive. There are judicious measures the Government could be taking to alleviate some of the most socially damaging effects of the turmoil in the housing market. This does not mean luring first-time buyers into a falling market by suspending stamp duty, as some have suggested, and it does not mean subsidising housebuilders. The focus should be on helping people avoid the nightmare of repossession and preventing irrational panic.

As the Liberal Democrat Treasury spokesman, Vince Cable, pointed out yesterday, the Government could establish a scheme to allow those unable to make their mortgage repayments to sell their homes to social landlords and remain as rent-paying tenants. Local authorities and housing associations could be given permission to buy unsold private properties to alleviate Britain's chronic shortage of social housing.

None of this should be done without great care. There is a fine line between state action to protect the vulnerable and bailing out the undeserving and improvident. If the Government is to have any chance of success it must be quite certain of what its purpose is. The idea that ministers can bring back the days of rising prices in short order is a dangerous fantasy. The market was grossly overvalued. An entirely natural correction is taking place. The job of the Government is to minimise the social harm of the downturn, not engage in reckless attempts to "rescue" the market.