James ConeyMay 19 2022

We need a housing stock reset

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We need a housing stock reset

You can’t talk about the cost of living if you’re a Tory. Firstly because so many of the Conservative party can’t be trusted to say anything without putting their foot in it.

But mainly because no one wants to hear advice, even if it is straightforward and plain-speaking, from someone they think went to Eton.

It may well be the case that many people do need help learning how to shop and cook in a different way to make their incomes stretch further, but don’t touch the subject.

Leave it all to Jack Monroe.

You also can’t solve a housing crisis if you’re a Tory. And that’s because no matter what solution you come up with in the mortgage market, it won’t solve the fundamental issue over housing stock.

A Tory MP once told me about his first days as a local councillor. He was put on the planning committee. He asked the local head of the Conservatives what he should do.

“If you want to get anywhere in this party, say no to everything,” he was told.

The MIG used to exist here too. It died out though for good reason.

Anyone who has ever sat through a council or parish council planning meeting will recognise this view, which brings me to the latest plan by the levelling up secretary Michael Gove to ease housing affordability: a guarantee scheme for first-time buyers. 

The riddle he is trying to solve is the familiar question posed by many young people: why is it I can afford rent but can’t get approved for a mortgage of the same amount?

There are lots of good reasons for this, not least the fact that when you are approved for a mortgage you need to show that you can afford not just at today’s rates but those in the future. And as we are learning in recent months, this is critical.

There are also lots of rules, many of which came in after the global financial crisis, governing affordability and the risk banks are allowed to take on.

These are right and proper and eminently sensible.

What Gove has suggested is a return to the mortgage indemnity guarantee, which still exists in Canada and is being used as an example of good practice.

But for those with long enough memories, the MIG used to exist here too. It died out though for good reason, one being that it just added cost to the buyer, the other being that it massively over-inflated house prices.

It does nothing to do is solve the underlying issue affecting first-time buyers, and that is the cost of homes.

Of course, we already have a mortgage guarantee scheme that the Conservatives introduced during the pandemic as a way of boosting the number of 95 per cent mortgages. 

What Gove is suggesting more or less shifts the responsibility for offering these loans from the public to the private sector.

That’s a very Tory ideal. However, what it does nothing to do is solve the underlying issue affecting first-time buyers in London and the home counties, and that is the cost of homes. In fact all it will do is exacerbate rising prices.

And no matter what the best intentions of any Conservative, the problem will always be that Tory councillors who want to succeed will always end up looking after their community of current homeowners at the expense of future ones.

As a result, what’s currently happening is all of the affordability tests baked in since the last crisis are being undone.

What we need is not longer and bigger mortgages that run in to retirement, but a reset on housing stock. I can’t see that happening though, either.

The guidance issue

Speaking of rule changes, I typed the word ‘guidance’ into my email search the other day. Up sprang press release after press release from insurers and investment platforms.

The lobbying effort is well under way.

It’s almost like it has been co-ordinated.

I’m tied on the issue of extending guidance. On one hand I do think a middle ground needs to be found between full-fat advice and bog-standard generic information. Not for the sake of pension savers, but for those on the breadline who need advice from the likes of credit unions who can’t give it.

But on the other hand, some of the worst mis-selling scandals started with advice.

Perhaps, though, the near total death of commission means the worst problems are already fixed.

Talk the talk

Whenever any money news breaks, an investment platform sends out their latest thoughts.

From budgeting to inflation, money-saving tips to energy costs, they’ve got an opinion.

It’s an arms race. But what’s it achieving?

James Coney is money editor of the Times and Sunday Times