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Government bails out builders by buying houses they can't sell
Nicholas Cecil, Chief Political Correspondent16 Jul 2008
Ministers today unveiled plans to buy up homes which housebuilders hit by the global economic downturn are unable to sell.
They also announced a new scheme to help households earning up to £60,000 a year get on the property ladder by renting first and then buying.
The move highlights the difficulties faced by even reasonably well off firsttime buyers, particularly in London.
Housing Minister Caroline Flint has already earmarked £200 million to buy up surplus housing stock, for which crisis-hit housebuilders cannot find buyers, and turn these into "affordable" homes.
Today she announced that extra millions will be allocated to expand the scheme but stressed the properties had to meet housing needs.
The Housing Corporation is in talks with many of the major housebuilders on bringing unsold homes into the affordable housing sector.
Households earning up to the £60,000 threshold will also be able to rent a flat or house at a discounted rate for two or three years under the new Rent to Home buy scheme.
They will then have the option to buy a share in the home, starting from 25 per cent of the property. The affordable rent will be set at no more than 80 per cent of the market rate to allow people to save for a deposit to buy the property.
Ms Flint said: "We are determined to continue to do everything possible to promote long-term stability and fairness in the housing market. The international-credit crunch has created significant-challenges not just for the UK housing market, but in other parts of Europe and the United States.
"However, the long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase housing supply.
"That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families but for those who work in the house building industry." She also confirmed that Barking and Dagenham will be one of four areas to get new "local housing companies" - partnerships between the council and the private sector to provide new homes on surplus land. The other three are Newcastle, Nottingham and Manchester.
Other measures announced today include allocating the first tranche of a £510 million pot for councils which have helped make land available for development and plans to build up to 75,000 homes across 20 towns and cities with high demand.
Reader views (9)
Tax and spend = like the gold sell off (at bottom of the market) they'll no doubt manage to use our money to pay way over the odds for the properties, which will end up worth a lot less than they paid. Wonder if there will be a statistical correlation between the numbers of properties bought from a company and labour party donations?
- Tony, London, 17/07/2008 09:54
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The moment the gov't announces that it has £200m to spend on housing, it is underpinning the price: this makes houses less affordable for those looking to buy, not more. For clever people, they really are pretty dim. If they quietly bought up cut-price housing without proclaiming the fact, this might have some short-term effect, but in the end a market is a market: increase the supply of funding without increasing the physical supply of the product and you inflate the price, which has been the story of the last 20-30 years in housing.
There is another weaselly concept in the housing market as well as affordability, namely 'key worker' status, which gets one onto the list to buy or rent 'affordably'.
I'm not aware of any category of 'key worker' in the private sector: do bakers and scaffolders fit the bill? I suspect not.
Even 'key worker' status carries its problems for the lucky few: I read lately of someone in a new development he liked a lot, but if he moved his job to the private sector, he would lose his entitlement to stay - in other words, he's in a modern version of a tied cottage, a funny thing for a Labour gov't to be promoting.
There's a lot of muddled thinking here; subsidising the few can only buy those few a relative advantage over others, not help the market as a whole.
- Mdj, Leyton, e10 london, 16/07/2008 22:58
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Has anyone actually seen these so called affordable houses? I've looked at a block of 6 flats just outside Tetbury, in Gloucestershire. Unlike all the other properties the affordable ones were jammed in the corner, with dustbins right outside the entrance. No where to park a car, instead each had a cycle rack (and these are for people earning up to £60,000 pa).
Kennels might be a better description.
- Steve, Cirencester, UK, 16/07/2008 16:10
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Actually not a bad idea at the right price, which is not the current market one. If developers drop prices by 50% from last year's ridiculous peaks then the Government will get back some badly needed social housing at a reasonable price. Not sure how people who have already bought in those developments will feel though.
- Mark, London, 16/07/2008 14:30
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I find this truly amazing. Builders are laying off staff; there is an oversupply of property as no buyers yet the Government wants to build more houses. Surely, the simplest thing is for the Government to buy existing new builds on the terms as outlines (good idea). This will keep people employed and then when the market improves they can then sell as needed. A win/win situation.
- Simon - Bucharest, bucharest - Romania, 16/07/2008 13:43
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So the government is prepared to assist the housebuilding industry in wake of the recession but what about ALL the other industries in Britain?
Is this not a clear cut case of Government favouritism and bias?
- Fraser, Telford Park, 16/07/2008 12:48
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Totally wrong to bail out building firms and developers who have cashed in greatly. Make them sell their product at a sensible price. 2 bed flats should be not be more on average than 69-75K for example. They have all been greedy.
- Ng, west sussex uk, 16/07/2008 12:26
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I wonder what the bottom line will be, if a figure of 80% means more than £400 a month, many people will simply not be able to afford it!
- Naos, Southall UK, 16/07/2008 12:22
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Buying a percentage of the property is all well and good if you can buy the remaining percentage of the property at the original purchase cost. This system becomes unfair when you have to buy the outstanding percentage at market price. meaning the average person will never be able to own their own home outright
- Carribean Queen, brixton uk, 16/07/2008 11:10
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