Shared equity cash could have built 175,000 homes
Providing £3.5 billion in grant to housing associations rather than the same amount in equity loans to homebuyers would have enabled 175,000 new affordable homes, David Orr has said.
The chief executive of the National Housing Federation criticised the coalition government for slashing capital spending for housing in 2010 and now providing demand-side subsidies for people to buy homes. The government reduced capital spending from £8.4 billion to £4 billion in the spending review.
In a bid to stimulate economic growth chancellor George Osborne announced £3.5 billion of equity loans for home buyers in Wednesday’s Budget.
David Orr, speaking at the NHF Finance Conference in Coventry yesterday (Thursday), said: ‘We took the biggest capital cut anywhere [in 2010].
‘I am not going to be lectured to by ministers when I go back and say we need some of that back if we going to make the economy grow and get houses built.
‘They took too much away, if you take more than 60 per cent of capital investment out of new home building you will have an adverse impact on home building.’
Mr Orr said providing money to improve mortgage availability ‘will not increase the flow of new stock’.
He said: ‘The more probable impact in the short term is that house prices will go up because there will be more people with more mortgage finance in their pocket looking to buy the same housing stock.
‘Do we need another house price bubble? We need it like we need a hole in the head.’
Mr Orr said giving the £3.5 billion to housing associations instead would have generated around £30 billion of economic activity and led to 175,000 new homes.
Earlier, journalist Andrew Neil also said there are concerns about the policy, saying that there could be defaults on the loans if interest rates rise in the future. He said: ‘Economists who look at this do worry. Exactly what was the sub-prime crisis about? Giving mortgages to people who would otherwise not be able to afford it.’
However, Digby Jones, former director general of the Confederation of British Industry, offered a partial defence of the government. He said: ‘We do need quick, urgent building of houses, the government really needs to engage on this and at the same time write a cheque.
‘They went some way to acknowledging the issue [in the Budget], you would say they went the wrong way - but at the end of the day at least they did something.’