Boris Johnson was sunning himself in Cannes last week at the World’s greatest property development conference, obscurely called MIPIM (20,000 participants, 2,000 exhibitors from 80 countries) encouraging more global investment in totally unaffordable London property and making jokes in very bad taste about German invasions (watch his speech here if you have 32 minutes to waste in pointless activity).
Meanwhile, Chancellor George Osborne was busily working away at next week’s Budget. With a flick of a pencil, George could double the affordable housing investment programme and it would still be within the margin of error of the housing benefit budget. There are endless changes he could make to fund such an increase – for example, additional taxes on the most expensive properties, penalties for land hoarding, or ending the ridiculously ineffective New Homes Bonus.
But no. Instead Osborne is, according to the Sunday Times (paywall), beavering away on an extension to the Help to Buy scheme. Spun as a scheme designed to help people get on the property ladder, Help to Buy has been widely criticised as being inflationary at a time when the UK economy needs a property bubble like a hole in the head. It is of course a political rather than a housing policy – Osborne believes that rising house prices will make a key sector of the electorate feel richer and therefore better-off.
Right wing commentator Fraser Nelson in the Spectator says that pouring more petrol on the property market fire by extending this ‘discredited’ scheme ‘would be laughable if it were not so plausible.’ It is, he says ‘a flagrant example of politicians using taxpayers’ money in an attempt to buy votes. It’s a sign that Osborne intends to use help-to-buy as an election weapon, and as loaned money doesn’t show up on the deficit figures he’s quite relaxed.’
And he adds: ‘The last conservative leader who tried to manipulate the property market for political purposes (to claim to voters he was on the side of hard-working people etc) was George W Bush – and we all know how subprime lending worked out for America. But before its damage, it did bring a property boom – and that’s what Osborne seems to be trying to seek now.’ He also quotes a report from Bloomberg based on a survey of analysts, which concluded that Help to Buy is ‘creating the illusion of wealth by subsidizing house prices and encouraging a further levering up.’
So what is Labour saying? Labour appears unwilling at this stage to get caught up in an argument about who is in favour and who is against helping aspirational people to buy their own homes. Ed Balls is therefore not presenting a simple ‘end it’ message. Instead he is arguing for major reform, restrictions that would prevent the scheme from creating an unbalanced housing market that could put economic recovery at risk. He would cut the upper limit on the scheme from £600K to £400K, possibly with regional variations, and consider restricting the scheme to first time buyers. He argues : “The lack of funding for affordable housing, alongside a housing market that has been very slow to respond to rising demand, means there is a real risk for our economy” – by which he means greater pressure to raise interest rates faster.
Balls raises the interesting concept of a ‘Help to Build’ scheme as an alternative, using Government guarantees in a different way to help small and medium-sized builders to access finance. He thinks such a scheme could help provide an extra 10,000 homes a year. He has also floated the idea of using Government guarantees to back a new generation of New Town Corporations.
Help to Buy demonstrates that Government money is sloshing around in housing in its billions. Yet it is only when the conversation turns to genuinely affordable housing that the language of austerity reappears. There is no money left we are told. In my view, there is lots of money left. It is just being spent on the wrong things by the wrong people for the wrong purpose.