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Starter Homes: The longest journey starts with the smallest step

by: Pad Bamford, business development director at Genworth Financial
  • 03/11/2015
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Starter Homes: The longest journey starts with the smallest step
MPs were at loggerheads this week in the House of Commons over the contents of the government's Housing Bill, and in particular the Starter Homes Initiative. Genworth's Pad Bamford explains why such steps, however small, are vital to growing home ownership.

Disagreements over the future course of the government’s housing policy are nothing new; so to hear that MPs are actively disagreeing over the contents of the Housing Bill, with the Starter Homes Initiative coming under specific attack, is perhaps not surprising.

However, after many years when it looked like any sort of sustainable and workable housing policy might be some sort of fanciful dream, I tend to think the fact there are plans being put in place with the acceptance that a great deal more new-build activity is required, is actually a huge step forward. MPs of different political persuasions are always likely to think that ‘more can be done’, however, even the longest journey starts with the smallest step.

I’m also intrigued by the term ‘affordable housing’ and how this can differ greatly depending on who is using it. Clearly some MPs believe that ‘affordable housing’ is not a £450,000 house in London because it would ultimately still be out of reach for most purchasers, and there is obviously a great element of truth in this.

Yet, looking at the plans, that £450,000 value is a maximum price and with the right processes, design, and location, there should be an opportunity to build many more affordable homes which come in at well below this price.

Of course, what is often missed in such a debate is the means by which buyers are going to purchase these properties. A 20% discount will obviously be welcome but it doesn’t negate the need for mortgage finance – in most cases of the low-deposit/high loan-to-value (LTV) variety.

These ultimately are two parts of the same coin – yes, we need more new homes built but without a sustainable way of providing individuals who want to buy with the financial means to do so, the plan becomes unstuck. Ultimately, it is highly unlikely these purchasers will be stumping up large deposits; with the end of Help to Buy 2 next year we therefore need a system which will incentivise and reassure lenders to continue offering high LTV loans to new-build purchasers, perhaps supported by private mortgage insurance.

If this can be achieved then new homes truly can become affordable and the Housing Bill may hopefully begin to deliver on its much-needed aims.

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