Three huge numbers thumped into the in-tray of the next housing minister this week: 270,000, 1,000,000 and 300,000,000,000.
They come from the election manifesto from the Home Builders Federation (HBF) and a pre-Budget submission from the Council of Mortgage Lenders (CML) that amounts to the same thing. Together they make clear just how big the challenges are going to be over the next five years.
The 270,000 represents repossessions. It’s the number of families who lost their home in the five years after repossessions started falling in the last housing market crash. If you read 2009 for 1991, then the five-year term of the next government represents the equivalent period this time around.
The CML says lenders are managing the problem better now and is forecasting 53,000 repossessions in 2010 - lower than the 69,000 seen in 1992. At the moment that looks if anything too pessimistic although things could still be derailed by a double dip recession.
So far, so good, but history also shows that ‘there is likely to be a long tail with elevated possession levels for a number of years after the depth of the recession, as some borrowers kept in their homes in the initial period of the downturn are unable to get back on their feet and repay their arrears’. Longer-term arrears are building up, says the CML, and in many cases involve people with multiple debts.
It warns that avoiding a repeat of 1992-1996 in 2010-2014 will mean extending the time-limited rescue measures introduced by the government: support for mortgage interest after three months, not nine; retaining the higher limit of £200,000 to help people with larger loans; and keeping the standard mortgage rate at 6.08% to help borrowers stuck on higher rates. ‘We are not out of the woods yet, and there are real downside risks to be carefully managed over a period of years after the general election,’ says the CML.
The 1m represents the shortfall in new homes identified by the HBF and the economic and social consequences of higher waiting lists, more overcrowding, young people unable to afford to buy and hundreds of thousands of job losses in the housebuilding industry.
The HBF says the next government must ensure the planning system delivers enough developable land, cut the cost of regulation on new homes, address the lack of mortgage availability, give more financial help to first-time buyers and (you guessed it) retain funding for Kickstart and Homebuy Direct.
However, the housebuilders sit firmly on the fence over the issue of Tory targets and Labour localism. The formula ‘encourage and incentivise the timely adoption and maintenance of up to date local plans to meet identified housing requirements’ neatly fits both parties’ policies but it’s the results that matter.
The £300bn represents the amount of money that lenders will have to repay between 2011 and 2014 for support given under the Bank of England’s special liquidity scheme (SLS - expires between 2011 and 2012) and Treasury’s credit guarantee scheme (CGS - expires between 2012 and 2014). That’s the equivalent of a quarter of all UK residential mortgage lending, with the two schemes effectively making up for the collapse of the wholesale funding market in 2007.
With the Bank of England making it clear that the SLS will not be extended, the CML wants urgent talks about how to manage the expiry of the two schemes and more help to re-open access to the securitisation and covered bond markets. It warns that doing nothing risks sending the tentative improvement in the mortgage market into reverse.
What might seem like high finance and therefore a matter for the next chancellor will have knock-on effects for the rest of the housing system: ‘It will be less easy to fund joint initiatives with the industry to increase low cost home ownership schemes; the cost of funding of social housing providers is likely to rise impacting on their capacity to increase housing provision to match demand; and funding of small scale private landlords will continue to be more limited.’
According to CML director general Michael Coogan: ‘At the moment we cannot see how to square the circle between increasing demand for housing, constraints on the necessary finance to deliver it, the repayment of £300 billion of lending support between 2011 and 2014, and reductions in public spending as the fiscal deficit is addressed. And all of these features apply at a time when more people are going to need housing help.’
So over to you, housing minister. No pressure, then.
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