YESTERDAY's Budget was certainly not short of housing measures. Chancellor Alistair Darling made a welter of announcements including an enhanced shared equity scheme for key workers, a cut in stamp duty for people in shared ownership, consultation on strengthening the mortgage market, a fundamental review of housing benefit for people in work to improve incentives, indentifying more public sector sites for new homes and an Office of Fair Trading inquiry into sale and leaseback schemes. Small wonder that the Budget was warmly welcomed by CLG ministers.

Yet the Budget was also notable for the things he did not do. He did not attempt to match the Conservatives by pledging more general cuts in stamp duty. He resisted pleas to cut VAT on refurbishment to bring more empty properties back into use.

Poor Mr Darling even got it in the neck for the CLG's Housing and Regeneration Bill, with the National Housing Federation warning that the legislation will result in housing assocaitions being reclassified as public bodies and their £47bn of borrowing becoming public debt. 

The revamp of open market homebuy will inevitably take many of the headlines. It would be hard to criticise 'a new shared equity mortgage to help an extra 20,000 people buy their own home' except for one thing: that was how the existing scheme was described when it was launched in October 2006 and it has been widely criticised for being too complex and inflexible. One of the four mortgage lenders that were involved has since pulled out of the market and the other three will not be involved.

Two new schemes will see 'thousands of first-time buyers and key workers could see their purchasing power boosted by up to 50 per cent with new home loan, according to the CLG.

The two schemes (more detail on the Housing Corporation website here) will offer higher equity loans of up to 50% of the value of a property. Ownhome will be provided by a partnership of Places for People and the Cooperative Bank and MyChoiceHomeBuy by a consortium of eight associations. In addition, shared owners will not now pay stamp duty until they own more than 80% of their homes.

All that is good news for the lucky key workers and first-time buyers who will benefit. However, it remains to be seen how the funding will work and whether key workers really find the new schemes easier to navigate than the old one. 

And the whole idea remains open to the fundamental criticism that subsidising homes for them merely increases prices for everyone else. That might be seen as a price worth paying but for the fact that another part of the Budget will be working directly against that aim. 

For, even as key workers attempt to use their increased spending power, they will be competing for property with second home owners and buy-to-let landlords who know that from April they will be paying less than half as much capital gains tax when they sell.

Posted by Jules Birch, March 13

Posted in Finance, Housing associations, Housing benefit, Mortgages, Politics , Stamp duty, Low-cost homeownership

THE UK'S housing stock is now worth £4,000bn - almost three times as much as our £1,300bn gross domestic product.

The numbers in the Halifax's annual survey of the value of our homes [download word doc here] are truly staggering. But the most significant one is that housing equity has risen quicker than mortgage debt. In 1997, UK homes were worth £1,300bn, three times the level of outstanding mortgage debt (£431bn). In 2007, our $4,000bn homes were worth 3.4 times the level of mortgage debt (£1,200bn). The result is that homeowners are now sitting on housing equity of £2,800bn, up from £870bn in 1997.

That's great news for anyone who has owned their home for that long - it represents a notional profit of more than £100,000 for each of them. It's not bad news for anyone who bought even a year ago - house prices still rose three times faster than mortgage debt in the last 12 months.

For many homeowners the profits only exist on paper but they have nevertheless made homeownership a one-way bet: taking on more debt has guaranteed greater profits. No wonder buy to let has taken off as it has.

The government is another prime beneficiary - thanks to successive increase it made £6.4bn in stamp duty in 2006/07. In 1997 it made just £1.4bn in tax but paid out £2.7bn in mortgage tax relief that has since been scrapped. Net gain: £7.7bn. 

But what about the losers? Current and future first-time buyers are effectively paying for those profits. And it's hard to look much beyond tenants for the really big losers. In the private sector they are lining the pockets of buy-to-let investors and in the social sector they have watched their chances of getting on to the housing ladder soar out of reach.

In its 2001 manifesto, the government promised to 'examine the ways in which tenants can be helped to gain an equity stake in the value of their home'. Nothing has happened since then, but homeowners have gained an average of £75,000 each in housing wealth.

Posted by Jules Birch, Jan 14

Posted in House prices, Stamp duty, Tenants