Help to Buy in the BANANA republic
Britain's housing crisis is about to get a lot worse before it gets better.
Another day, another demand side reform.
Yesterday, The Times headline read ‘Sunak eyes more Help to Buy.’ The PM is, apparently, drawing up plans to reinstate the policy in order to make it ‘a key plank of the Conservatives’ campaign for a fifth term in office.’ Usually in my dreams this is where I try to run but can’t.
The resurrection of Help to Buy is something of a blow to those who hoped that particular sleeping worm would be left to lie. The fact is that, in terms of increasing home ownership, Help to Buy was about as successful as the Maginot Line. Last month I wrote a piece for Con Home to celebrate the end of H2B, on the ground that it had wasted a decade and exacerbated the housing crisis:
A recent House of Lords report states that “evidence suggests that, particularly in areas where help is most needed, these schemes inflate prices by more than their subsidy value”. Paul Cheshire, a former government adviser, agreed, telling the Daily Telegraph in no uncertain terms that: “There’s absolutely clear cut evidence that Help to Buy inflates the prices of those homes that qualify.”
When he introduced the policy, Osborne said he was concerned that:
“the deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution.”
And how stand the chances of that great majority now, after a decade of Help to Buy, to own their own home? The answer is even poorer than before.
“Young people are more dependent on substantial windfalls (in the form of the Bank of Mum and Dad, partnering or government support) to access home ownership than in the past.”
The sheer pace at which increases in house prices have outstripped wages has reinforced an ‘“inheritocracy”, in which first time buyers are even more reliant on the bank of Mum and Dad to finance their dreams of home ownership.
Reintroducing Help to Buy is a dog that ain’t gonna hunt. If fact, bringing it back could make things even worse than they were last time.
When Help to Buy was previously in effect, so was the Government mandated housing target of building 300,000 homes a year. But following a Commons rebellion, Michael Gove was forced to write to a number of MPs promising the target will instead be a "starting point" and become "advisory". As a result of this watering down 55 local authorities have scrapped their planning targets by suspending their development plans, which specify how they will meet demand for new homes in their area.
This leaves the government without even a twig, never mind a stick, with which to force new homes on reticent local government that’s all too keen to pander to NIMBYism - no matter the cost. A recent estimate from Lichfields predicts that 77,000 fewer homes will be build every year as a result of these reforms, with the total number falling below 120,000 homes.
The new-build homes that Help to Buy applied to carried a premium of nearly 20 per cent by the time the policy ended. What will the premium be now the housing supply is even more constrained? Now consider that the Help to Buy premium will be on top of house prices, the increases of which will be accelerated even further by the fall in housing supply. Things are bad right now for first time buyers, but a few years of this and they’ll need to start keeping a file on them at Amnesty International.
So what can government do? The answer is actually very little. When it comes to housing, Britain is less a democracy and more a BANANA* republic.
Many people pointed out the absurdity of a Downing Street source claiming they are unable to do anything to boost supply. But the source is right. Rishi has a a huge majority, a huge majority of which absolutely refuse to support supply side reforms that might result in more houses being built in or near their constituencies. 60 Conservatives signed the amendment calling for the mandatory target to be scrapped and that was only the core of the rebellion; forcing it to a vote could have seen hundreds voting against the government.
An inability to overcome the structural and pathological NIMBYism within the party means Downing Street faces totally perverse incentives when it comes to housing. It has to been seen doing something about the housing crisis. Demand side reforms are something - and something it can actually do. Ergo it must do demand side reforms. The rider of a tiger may not have a viable long term strategy, but still clings on.
This leaves the door completely open for Labour to seize the open ground of becoming the party of home ownership, which it’s seizing with the gleeful opportunist of Heinz Guderian as pops his 8th Pervitin of the day.
For Tories, as James Vitali notes, ‘this really lays down the challenge to Conservatives. It would be catastrophic for its electoral prospects if Labour were to seize the claim to being the party of homeownership.’
The question for those of us who believe in increasing home ownership is; how are we going fuck this pig?
Tories need to become housing radicals - radicals in that we stand on a platform of promoting home ownership and mean it. Those of us who believe in building more houses need to become evangelical about it, reminding people of the moral, social and economic squalor that will result if we continue to fail.
But to win over the party that evangelism needs to be framed in terms the party will be receptive to. One of the great underpinnings of Thatcherism was that enabling people to accrue enough wealth for them to stand on their own two feet would create a society of greater self-respect and dignity. The belief that an increase in popular participation in capitalism would create a better society applies as much to this generation as it did to hers; Conservatives need to enable the next generations to have the same participatory role in capitalism that their parents enjoyed under Thatcher by enabling wealth accrual amongst today’s workers.
He has seized on not only the political and economic benefits, but the moral necessity of building more homes – and has been richly rewarded. Polievere started out with one of the lowest approval ratings of any Canadian Conservative leader but, as Canadians have begun to feel increasingly financially precarious, the latest polls show he has an 8-point lead over Justin Trudeau.
There are many policies that we can implement to reduce the housing crisis, but until we overcome the structural issues preventing us getting it through the Parliamentary Party it’s pretty much pissing in the wind. Putting this case to the party is likely to make us deeply unpopular. But the work lies at hand, and it it too important for us to stand idle. Besides, there will be some hope of redemption eventually. As Iain MacLeod once said:
‘The Conservative Party always in time forgives those who were wrong. Indeed often, in time, they forgive those who were right.’
*Build Absolutely Nothing Anywhere Near Anyone