Political Promise

A Crazy Idea to Help First-Time Homeowners

In David Brownsey-Joyce on January 25, 2011 at 10:25 am

David Brownsey-Joyce spent the week thinking about the prospects of buying his first home and instead came up with a crazy idea for the housing market.

The housing market is a mess; the situation facing the majority of young people is that they will find it incredibly difficult to get onto the property ladder. This is due to exponential rises in house prices that have far outstripped the level of pay that people have received.

I often wonder about the prospect of buying a small flat to live in and short of winning the lottery it is not a vastly realist opportunity at this moment, which is strange because I earn a reasonable wage but still it would not be enough to get a mortgage of more than £90,000.

I am in a far better position that a lot of people I know in that I have a deposit as well, thanks to a small inheritance, but still it wouldn’t be enough.

There are a few options available to me, for example shared ownership, I have now registered and been accepted onto Housing Options, the shared ownership scheme in London, but when you add on the rent to the mortgage, as well as a monthly service charge it would still be incredibly difficult to afford.

At the least it would be a monthly struggle with the threat of repossession always hanging over my head.

So I got thinking about what the Government could do to sort out the market, especially after the Chancellor, George Osborne, declared that he wanted people to get away from buying property as an investment and rather have it as somewhere to live; I thought why don’t we just build a new generation of social housing?

The idea is simple. We build a new generation of homes across the country, owned and operated by central Government, not local authorities, housing associations or private firms. Straight away I can hear the denouncements of any idea that has ‘social’ anywhere near it but consider the fact that across the country property prices have skyrocketed far in excess of the average wage. Where you do have prices at a reasonable rate you do not have people on wages at the level able to buy them.

So central Government builds say fifty thousand new homes, a mixture of flats and housing, these are then put onto a Government controlled sales website, not the open market, where you have to register and pass a financial interview before making a purchase. The key thing would be that the properties would be set at a basic value, relative to the cost of building, rather than a commercial rate. You can also only buy one property. You cannot own a second and you must be the one living in it.

The final piece of the puzzle is this. You can only sell back to the Government, taking the level of inflation into account for the value of the property. Therefore instead of looking just to trade up based upon the increase in the market value, people would be looking to trade up based upon the amount of deposit they would have available, having cleared part or all of the original mortgage that they took out for the Government housing.

This I know is a crazy idea, one fraught with insanity and problems galore, but it is an idea on how to solve the housing market. Look at the benefits it would bring.

A new generation of housing projects all over the country, all bringing in jobs, all with the possibilities of apprenticeships, thereby creating new jobs and retraining those with skills to succeed in the open market.

The commercial market would have to react, most likely through their own development projects, and all of a sudden we are no longer in a situation where demand outstrips supply, the biggest contributor to rising property prices.

All of this would increase competition and hopefully stabilise the rental market, a big problem in places such as London where rental prices have increased dramatically over the last few months as people are unable to secure mortgages and buy property so instead are squeezing into the rental market to wait and see what happens.

If it didn’t stabilise the rental market, simply take 20% of the newly built properties and put them on a Government controlled rental list which is set at 70% of the market rate in that area, with no possibility of a ‘Right to Buy’ as it would be centrally controlled rather than through a local authority. Meaning people would hopefully use the extra income to save a larger deposit to convince a bank to lend to them.

At the same time if there is a ready supply of solid, cheaper, rental properties available all of a sudden the market has to react and cut their prices or else they lose out.

I know that this is incredibly naïve but think about the fact that due to successive generations the younger people in this country are locked out of any possibility of owning their own property, of having something they can call ‘home’, unless they are incredibly lucky in, employment, wealth, or the bank of mum & dad, we are all a lost generation hopelessly grasping for an impossible dream.

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