Sunday, 01 March 2015

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.’

Readers' comments (10)

  • Evan Owen

    The operative word is "could".

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  • Chris

    But Mr Orr is missing the point of the budget proposal - creating even more financial products so that even more taxpayer money can be laundered into the financial sector whilst ensuring no reduction in the demand hence value of private rental property.

    the number of MP's who are private landlords
    the number of the cabinet with vested interests in the financial sector
    the number of backers of the Right-to-Buy who now own a portfolio of exla properties
    those whose friends and families are bankers

    All makes sense now - oddly, when Mr Costain was Minister for Public works there was a much higher tendancy to spend taxpayer funding on development!!!

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  • Usual tory spin, we have known about the fiscal suicide involved in creating house price bubbles through ramping up RTB, deregulation and empasising personal debt to pay for ever increasing house price rises and ensuring that supply DOES NOT MEET demand - this as an obvious economic vie to increase the wealth of those who already have wealth - come on.. its the conservatives, why does evryone keep pretending that they are interested in the needs of the majority or even the minority.. and woe betide those in actual NEED? Look at the list:
    >Inrease RTB discount (reduce housing option availabity)
    >Lowered application time for RTB (same)
    >Decreased grants and funds to RSL/Social Housing (same)
    >Increased subsidy to new home owners
    > Increase risk to mortgage debts (against banks and advisory to the government and arguably increasing the jhousing bubble)
    >Increased non taxable income rate (give to wealthy as much as needy)
    >Benefits capped at 1% wehn inflation is 2% (effectively making the poor poorer directly
    >Child care costs favouring two working parents (up toHUGE incomes and most funding going to those better off already)
    >1 billion injection to PRIVATE rented market builds!! (DOH!)
    >Austerity measures on house building, contruction and public services and sectors
    > Under occupancy (Bedroom tax) (making poor pay for accidentally having spare rooms) - another underclass
    > Council Tax Benefit reform (now even those on benefits pay some council tax!! and under the what the law says that need to live on)

    The effect? Housing Benefit will increase, poor will be poorer, house prices will rise, rich will be richer.. All hidden behind 'Austerity' and 'Demonisation of Poor' and we all already know (any economist will tell you) that Austerity does not help economies to recover you need to SPECULATE TO ACCUMULATE.. even SouthPark said that in a kids TV episode!

    Why? The government, the same as they did in the 80s/90s/00s stil think that higher house prices keep the economy going.. They dont really think that though do they? They OWN THE HOUSES!

    Joke's on you ;)

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  • oh and did i mention that poverty is now going to increase (especially for children) and homeless rate is skyrocketing?

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  • As much as I agree completely with the sentiment of the message, can I just ask how the 175k homes figure is reached. That works out at £20k per property built.

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  • This government is the most destructive and cruel I have known in all my 50 years.

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  • Same question as asked by Derren:

    David, can you spell out?

    Other comments, save Evasn: crying in your beer is not going to help anyone or move the debate along.

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  • Davey Harris

    Mr Orr may be somewhat naive. When will the commentariat accept that this government is launching a sustained and determined assault on poor people and the organisations that aim to support them. THEY JUST DON'T CARE ABOUT SOCIAL HOUSING, NOT EVEN A LITTLE BIT! Sorry to shout but a mixture of NHF cajoling and appeasement won't make a blind bit of difference to anything.

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  • Derren and John

    20k is approximately the amount of grant a Housing Association gets now to build a new home, the rest is HA resources and borrowing. So 20k of grant leads to one new home

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  • I thought that's the case of the amount of grant money, which is why I was asking, because it then relied on the idea that HAs could come up with the £billions needed to build the properties to get that grant, and I don't think they could in this climate.

    It would have still been far more beneficial for social housing if the Government used this pot to offer grants of £50k per home just to get a big construction drive, so I still agree with the sentiment of the message, I just think that the 175k homes figure is easy for ministers to bat away.

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