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Housing – An Issue or a Crises?

07th May 2015

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So today is polling day and I have just exercised my democratic right and put the big X in the appropriate box. Who that X was for matters not, especially in my 17,000 majority constituency), but that is not the point. It still feels good to vote.

Polling Station

Though to be honest it was a much more difficult choice in the run up to this election, especially when trying to really understand who really stands for what.

As an example, there has been a lot of hot air spouted in the run up to the election of how whoever is elected will suddenly, almost magically, begin to build more homes. This, after successive governments on both sides of the political divide have failed to scratch the surface of meeting the housing requirements that we badly need.

In the Blue corner we have the spirit of Thatcherism with Right To Buy being extended to 1.3m Housing Association homes in England. Despite an initial storm of criticism for this, given the fact that the last thing local authorities need is to lose more affordable housing and the howls of derision from those in the Private Rented sector struggling to save for a deposit, this could well appeal to some key voters.

They have also promised 200,000 homes built for first-time buyers aged under 40, at a 20% discount, (off what value exactly?) and introduced the new Help to Buy ISA’s for first-time buyers to help them save a deposit.

In the Red corner, Labour has promised 200,000 more homes by 2020, prioritising local 1st Time Buyers in new housing areas and also moved to guarantee three year tenancy agreements in the private sector and a “ceiling” on rent increases. Showing how important Housing has become as an issue they have also added “Housing” as point 6 in their 5 point plan!

The Lib Dems aim to increase housebuilding to 300,000 a year, developing at least 10 new Garden Cities and promising 30,000 Rent to Own homes a year by 2020. Meanwhile their proposed Mansion Tax bands are not quite as bad as many suspected.

UKIP want to prioritise social housing for people with parents born locally and also promise to protect greenbelt by making it easier to build on previously developed land.

Meanwhile the Greens say they would build 500,000 social rental homes by 2020, bring 350,000 empty homes back into use and abolish the right to buy council homes. They would also move to cap rents and introduce 5-year tenancies.

Quite a lot of promises in there but without too much detail around funding. Given the actual stats on housing starts in the past, we would really need to go some to get to these figures and we need complete buy in from public and private builders. In fact, some have already suggested that suddenly building 200,000 houses a year is untenable.

The problem is that the time really has come to start delivering on these promises to ensure that the current housing issues don’t get any worse. We need proper policies that help both the demand and the supply side, keeping them in equilibrium.

The biggest issue, however, has always seemed to be political mismanagement and interfering, as successive governments on both sides of the house over the past few decades have failed to understand or deal with the issues. Perhaps it would be best if politicians did not have any say in the housing market at all!

House Price Up

But what would be in our property / mortgage manifesto?

First off we should be lobbying the new Government to put a full-time Housing Minister in place as a full Cabinet position for the full term of the Parliament. This person would have a property background and be tasked with formulating a long term plan and its’ implementation. They would be responsible for the whole industry, planning, building etc. and would not move from cabinet post to cabinet post. In other words, a 5 year job.

We need to concentrate on building the type of homes that people actually want and can afford. It is no use just building a luxury development where 1 bed flats start at £1m plus.

We need to build more garden cities, not just the houses, but the schools, the pubs, the infrastructure, the communities. Make them places people want to live and bring up their families, with good transport links.

On the Buy-To-Let side, we need to leave aside the ridiculous histrionics that seem to suggest that all landlords are little Rachmans. On the contrary, the vast majority I have met happily forfeit “market rent rises” for happy, long-term tenants. Yes of course there are too many bad ones which need to be rooted out, but we should not blame all landlords as a whole. The Private Rented Sector has a very important role to play in the overall housing market.

I would definitely like to see the option for longer term tenancies of 3 or 5 years to try to encourage more stability in the rental market. For this to happen, we need to ensure buy to let mortgage lenders would be happy to accept these. Sadly the majority at present are not, which is wrong.

Maybe there should even be some hard-nosed, out-there policies as well? How about everyone who leaves their properties empty for more than 6 months a year must allow their properties to be “rented” to those in need?

Whilst I am at it, what about the mortgage market side?

Mortgage Industry wise we need to keep campaigning for all customers to be treated fairly. For transitional rules to be applied using common sense so as not to leave mortgage prisoners stranded. For a sensible re-introduction of interest only policies that are directed at the right type of borrowers and for age-discrimination on lending decisions to be abandoned.

Lenders need to understand that just cutting rates in ever decreasing circles will not lead to more business or suddenly stimulate the remortgage market, rather changes to criteria are what is most needed. More help for the self-employed and contractors as an example.

We need regulatory fees to be fair and not rise disproportionately so they threaten the very survival of much needed advisory firms. We also need a Regulator led and run register of all advisers, both on the intermediary and direct side, to help ensure the highest possible standards are adhered to and the cowboys run out of town.

Finally, we need more financial education in schools and colleges to prepare the borrowers of the future.

All of this is just for starters and I am sure there are many more detailed and valid ideas around that should be discussed.

As we go into the new Parliament, whatever it may be, we need to be very clear – the housing market is of central importance both economically and socially. We cannot let a serious issue develop further into a very serious crises.

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Andrew Montlake

About Monty

Andrew Montlake, Director and Spokesperson for Coreco, gives his honest and forthright views on the mortgage market, economy and all things property related. Monty was voted "Mortgage Personality of the year 2008", "Best Press Spokesperson" in 2011 and is the current holder of the British Mortgage Awards “Best Marketeer” title. Expect expert analysis, delivered in a down to earth style with a side helping of exuberance.