A new scheme to ‘Get Britain Building’ announced by Prime Minister David Cameron last month has a lot of good proposals, but it remains to be seen how far it will go in accomplishing the stated goal of getting the construction industry back on target and a multitude of first-time home buyers into a new house.
Mr. Cameron said that the average first-time home buyer in theUKwho can’t get assistance from parents or other family members is about 37 years old, and “ . . .that’s just not good enough.” He wants to give all the hopeful buyers who have been stymied by the credit crunch an opportunity to make that crucial move up the housing ladder, and he listed several proposals intended to facilitate the process.
The most promising of the proposals seems to be a mortgage indemnity scheme wherein lenders will be backed by government funds so they can make loans up to 95% of the value of a new home, so a buyer has only to come up with 5% in order to make the purchase. Currently, lenders are requiring an average of around 25% as a down payment, so this move should enable an estimated 100,000 buyers to get the funds they need, according to proponents of the initiative.
The Prime Minister also said that the UK is in dire need of more new homes, and proposed several avenues for their creation. The proposal includes allowing builders to borrow from a £400m ‘Get Britain Building Fund’ to get moving on approved sites; part of the criteria for release of these funds is the developer’s commitment to building ‘affordable’ homes.
Tenants in social housing are to be given the opportunity to purchase their residence for as little as half the market price, with the proceeds going towards the construction of more low-cost homes. That, says Cameron, would hopefully mean that a new home can be built for every one sold in this manner.
Another part of the strategy would allow developers to use government owned land, of which Cameron says there is a great deal, and to proceed on a ‘build now, pay later’ plan wherein they could pay back the cost of the land as new homes are sold. The plan also suggests that the same will be true of building sites already in progress that are ‘stuck’ for lack of financing. The government would put up enough of the initial funds to get construction going again and new homes ready for occupancy.
Currently, new home production is at the lowest level since WW11, curtailed by rising costs and the reluctance of lenders to extend loans. In theory, the new scheme will not only provide affordable housing for a significant percentage of buyers, but also thousands of jobs for workers in construction and many related industries such as plumbers, electricians etc.
The scheme also makes an attempt to address the problems of inconsistency in social housing; reportedly there are at least 6,000 households living in tax payer-subsidised social housing that have an income of £100,000 or more per year. Under the new approach, those residents would have to pay the open market rate if they want to continue living where they are.
The scheme, led by the Council of Mortgage Lenders and the Home Builders Federation, has been criticised by some housing experts who say it is too little, too late. Jack Dromey, shadow housing spokesman, suggested that £400 million is a drop in the ocean compared to the £4 billion that was cut from the housing budget last year.
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