07 Feb Government white paper aims to fix ‘broken’ housing market
Today’s white paper on housing will see Ministers admit that England’s housing market is “broken” as they unveil yet more new plans to build more affordable homes. The government says 250,000 new homes are needed each year and has admitted it is lagging behind schedule.
The new housing strategy for England includes forcing councils to plan for their local housing needs and giving them powers to pressure developers to start building on land they own.
Despite having failed to meet their own building targets between 1997 and 2010, Labour accused the government of “seven years of failure” on housing.
Communities Secretary Sajid Javid will set out the details of the housing White Paper in a statement to MPs.
- Forcing councils to produce an up-to-date plan for housing demand
- Expecting developers to avoid “low density” housing where land availability is short
- Reducing the time allowed between planning permission and the start of building from three to two years
- Using a £3bn fund to help smaller building firms challenge major developers, including support for off-site construction, where parts of buildings are assembled in a factory
- A “lifetime ISA” to help first-time buyers save for a deposit
- Maintaining protection for the green belt, which can only be built on “in exceptional circumstances”
So-called starter homes, championed by ex-PM David Cameron, will be aimed at “households that need them most” with incomes of less than £80,000 or £90,000 in London.
The government said there would be a change in focus from starter homes – which will be offered to first-time buyers at a discount – to “a wider range of affordable housing”.
However, our view is that building new homes is not necessarily the answer. In fact, there is research to show that every 1 per cent increase in the supply of new homes causes the ratio between an individual’s mortgage payments and their income to worsen by 9 per cent.
Building new homes actually makes property even more unaffordable. Lenders actually relax their lending criteria when it comes to new property meaning that they lend more. And when consumers are more able to buy a property for a higher price, the price of property doesn’t come down.
The Government’s view is that by increasing supply of property, the overall cost of homeownership will come down. This is simply not the case as house prices are rising at a faster rate than average wage increases.
It’s not possible for the Government to control house prices. However, it is possible for politicians to motivate lenders to offer longer mortgage contracts to reduce the size of monthly mortgage payments.
By increasing the duration of a mortgage to 30 years, for instance, it’s possible to make owning a property more affordable for those on average incomes
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