Less of the demand-inducing govt housing schemes; supply needs attention – Bamford

Less of the demand-inducing govt housing schemes; supply needs attention – Bamford

This month, Johnson was forced to step down as Conservative party leader, and by early September we will have a new Prime Minister. How times change. 

The question of course is whether with a change in the individual running the show, whether we will see those housing market announcements jettisoned as a new PM, elects a new cabinet, and we get a new Secretary of State in charge of DLUHC – the Department for Levelling Up, Housing and Communities. 

But what’s that you say? We already have a new Secretary of State. One of Johnson’s parting shots being to fire Michael Gove from the role and install Greg Clark, who may well only be there for the summer, unless the new incumbent to Number 10 wants to look for some continuity. 

It is a very tangled web being wove in the carpeted corridors of Whitehall and its environs, and it is only likely to become more complex as the days and weeks pass. 

 

Housing secretary making a mark 

Which brings us back to the housing market, our new Secretary of State, and whether he is circling in a holding pattern, or he will seek to nail a number of policy landings. 

Interestingly, I’ve already read that Clark has begun to engage with the Home Builders Federation (HBF) no doubt on the ways and means by which supply could be boosted. Something that Gove seemed reluctant to do. 

Not that I wish to criticise Gove. His reputation for ‘getting things done’ was I believe continued with his time at DLUHC, particularly in a number of areas such as leasehold reform, and there certainly appears to be an ongoing and concerted effort to increase the number of first-time buyers coming into the market. 

 

Addressing supply issues 

However, with supply such a key issue in our market, it seems somewhat obvious to have all stakeholders having sensible discussions about what can be done, particularly the HBF and the Secretary of State who are obviously going to play a major role in trying to correct the significant imbalance that exists between supply and demand. 

Even if, as anticipated, the cost-of-living increases and the ongoing impact of rate rises does begin to dampen demand – and there is already some evidence of this starting to take place – it’s still the case that the supply of housing in the UK is nowhere near enough to meet the needs of those wishing to purchase. 

I’m not just thinking of new-build or second-hand properties coming to market for owner-occupiers, but it’s also clear from the significant rise in tenant demand and rents, that there is a severe housing shortage in the private rental sector. Landlords would like to add to portfolios to aid supply in this area, but again this is easier said than done. 

 

Policies fuelling demand 

It makes housing policy a very tricky hand to play for the government, and I’m not so sure that the policies mentioned by Johnson last month, do anything more than simply fuel greater levels of demand, rather than address the supply-side issues.  

What I believe we all have to accept here is that ongoing and never-ending government intervention, which merely stimulates demand even further, has to come to an end. And the industry must effectively – and be allowed to – stand on its own two feet.  

For example, with Help to Buy due to end next year, there may be a temptation to provide it with a further stay of execution however this should be resisted. The industry, for example, has worked hard on a range of initiatives including Deposit Unlock, which will help fill that gap and help first-time buyers onto the ladder, and it will not come at any cost to the UK taxpayer, who I feel is suffering some degree of fatigue in having its money used in this way. 

Government support for industry initiatives and solutions is far more acceptable than government schemes, and in a marketplace which seems to have enough demand, there appears no need to pursue policies which merely accentuate the imbalance with supply. 

Far better to focus government resources on supply, and let the industry do its bit to help individuals into these homes.  

Housing minister Greg Clark sends out contracts to developers on cladding remediation – reports

Housing minister Greg Clark sends out contracts to developers on cladding remediation – reports

Writing in the i, Clark said that it would be “available for comment” for four weeks, after which the contracts would be finalised.

Former housing minister Michael Gove, who had been in the role since September and was replaced by Clark last week, secured an agreement with some of the UK’s major housebuilders earlier this year, with around £2bn committed and 45 signatories.

“The faithful translation of these pledges into action is essential to the reputation for dependability that such an important sector of our economy must maintain,” Clark added.

Clark continued that there would be no “backsliding” on the £3bn building safety levy, which will be raised against all qualifying projects in the UK, and developers would pay it, regardless of whether they were homegrown entities or headquartered overseas.

He said the Building Safety Act, which came into force earlier this year, would utilise new tools to pursue businesses who do not deliver on their pledges.

Clark said he had instructed the department’s new Recovery Strategy Unit to target any individuals or companies that “do not step up to do what is required of them”.

He urged large developers who had not yet committed to do the “right thing” and said it was “time to step up and be prepared to pay up”.

“As we identify more developers responsible for fire safety defects in buildings, I expect them to follow suit and take responsibility for repairs – and to do so quickly,” he noted.

Clark said that in the months and years ahead, there was opportunity for “productive partnership” between housebuilders, government, local councils and housing associations.

He added that he wanted to increase housebuilding and the best way to do this was to work with existing home builders, and that a “good working relationship” could “achieve big results”

“A working relationship depends on the efficient discharge of commitments given, without havering after agreements have been made.

“This is true in the normal course of business and policy. In the case of Grenfell, where we have a strong moral obligation to put right the failures that robbed families of the lives of 72 innocent people, that requirement is absolute,” Clark noted.

 

Marcus Jones appointed as housing minister

Marcus Jones appointed as housing minister

Jones was appointed by outgoing prime minister Boris Johnson on 7 July, as positions in the cabinet are being filled following a series of resignations since Tuesday. 

He replaces Stuart Andrew who stepped down from the post earlier this week amid disagreements within the government over Johnson’s knowledge around allegations of sexual assault made against MP Christopher Pincher. 

Andrew had been in the role since February this year. Jones is the 12th housing minister in as many years. 

Jones was previously vice chamberlain of HM Household, and has also been assistant government whip and minister for local government.

Jones tweeted: “I am pleased to be appointed as a Minister of State (Minister for Housing) in the Department for Levelling Up, Housing and Communities. 

“This is an important and challenging brief and I look forward to giving all my energy and attention to this demanding role.” 

UPDATE: PM Boris Johnson to step down and Greg Clark replaces Gove as Levelling Up secretary

UPDATE: PM Boris Johnson to step down and Greg Clark replaces Gove as Levelling Up secretary

According to media reports, the Conservative leadership contest will be held in the summer and a new prime minister will be in place by the party conference in October.

Johnson is expected to give a statement later today.

He has been prime minister since 2019 following a leadership contest, and then went on to win a general election a few months later.

During his tenure, he introduced a 95 per cent mortgage scheme and brought out a Levelling Up agenda that included scrapping Section 21 eviction notices, £1.5bn Levelling Up Home Building Fund and £1.8bn of brownfield funding.

He also recently made suggestions to extend Right to Buy to housing association tenants and to allow housing benefit to be used for mortgages, as well as intergenerational 50-year mortgages.

Gove sacked and other Levelling Up ministers resign

Widespread media reports also reported yesterday that Johnson had fired Michael Gove from his role as secretary of state for Levelling Up, Housing and Communities.

Reports say that he had called for Johnson to resign amidst growing turmoil in the Conservative party.

Gove has been in the role as secretary of state for Levelling Up, Housing and Local Communities since September. He is the fourth secretary of state since 2015.

Before that he was chancellor of the duchy of Lancaster, the Queen’s rural estates. Other roles he has held during his political career include minister for the cabinet office and secretary of state for environment, food and rural affairs.

He took over from Robert Jenrick, who held the role between 2019 and 2021. Other people who have held the role in recent years include James Brokenshire, Sajid Javid, Greg Clarke and Eric Pickles.

The Department for Levelling Up, Housing and Communities has also had several resignations, including housing minister Stuart Andrew, who took on the role in February.

Other resignations in the department include Kemi Badenoch, minister of state for local government, faith and communities, and Neil O’Brien, minster for Levelling Up, the Union and Constitution.

As of 10:30am this morning there had been 59 resignations since Tuesday evening.

Greg Clark made Levelling Up secretary

Greg Clark has been appointed as Secretary of State for Levelling Up, Housing and Communities, replacing Gove who was sacked by the now outgoing prime minister.

Johnson is currently making cabinet appointments and is reported to stay on as prime minister in a caretaker role until autumn. 

Clark was previously Secretary of State for Business, Energy and Industrial Strategy, a post he held for three years until July 2019. Prior to that, he was the Secretary of State for Communities and Local Government from May 2015 until July 2016. 

A replacement for the housing minister is yet to be announced, following Stuart Andrew’s resignation yesterday. 

Government should prioritise homebuying process improvements and leasehold reform – Rudolf

Government should prioritise homebuying process improvements and leasehold reform – Rudolf

I think it would be fair to say that this was something of a hotchpotch of ideas, a number of which – let’s be frank – were not on the agenda until very recently. Hence, we have the idea of opening up Right to Buy for housing association tenants and the ‘Bricks for benefits’ idea for working people receiving housing benefit, aiming to allow them to choose whether to pay it to a landlord or a lender.

That is a very simplified version as we await further details, but alongside these was a commitment to review the mortgage market again, particularly to look at how to turn ‘Generation Rent into Generation Buy’.

As a number of people have already pointed out, this is hardly been an issue not fully explored in recent times, and indeed we might well argue that part of what stops many first-time buyers making their first move, is the thought of what it might cost, but also whether they will actually get to the point of completion, given the large number of fall-throughs, 30 per cent, that happen each and every year.

Which first-time buyer do you know that would be happy to put up to £1,500 on the line each time they tried to purchase knowing full well that 30 per cent of all transactions are aborted, and at a time when the level of housing supply available is at such low levels that even getting to the point of offer accepted can be a real struggle?

 

Improving the homebuying process and leasehold reform on cards too

You might conceivably argue that one way to get more people onto the ladder is to have a process which delivers greater levels of certainty and transparency to all concerned, and which gives all parties the very best chance of working through a transaction to its conclusion.

However, while the Prime Minister may not have explicitly mentioned this in his speech, we know that there is a significant push at Department for Levelling Up, Housing and Communities level for improving the process, the greater use of upfront information, and the like. We are expecting further progress here with a strategy plan hopefully to be published before Parliament’s summer recess, which will start from 21 July.

There was however one major Conveyancing Association (CA) workstream – leasehold reform – which was mentioned by the Prime Minister and we do appear to be getting the progress we have been seeking from the government in this area.

Back in January the CA was involved in a cross-industry letter to Michael Gove, urging him and his department to implement the measures which had already been announced that would improve the lives of many leaseholders. Measures such as legislation on Leasehold Reform, reasonable fees and timescales for administrative activities, and managed freehold.

It would appear we are to get that leasehold reform in, what we hope will be, the very near future. The Prime Minister talked about a reaffirmation of its commitment to end unfair leasehold terms ‘to give leaseholders better control over their homes and lives’.

Specifically, it said will help leaseholders buy their freeholds, with ‘discounts of up to 90 per cent for those trapped with egregious, escalating ground rents’. As we’re all acutely aware there has not been a great deal of fairness in the leasehold system for a long time and leaseholders have felt like second-class citizens, so these changes and measures can’t really come quickly enough, especially as they have cross-party support, are generally non-contentious and have been discussed for what seems like an age.

It is therefore positive to see leasehold reform highlighted again, backed by the government and with a hint of what might be to come, hopefully very soon. The fight and work will go on until we get the fairness leaseholders deserve.

Building owners face 10 years in prison for continued leaseholder cladding bills, Gove warns

Building owners face 10 years in prison for continued leaseholder cladding bills, Gove warns

In a letter to freeholders, building landlords and managing agents, secretary of state for levelling up Michael Gove sent a reminder about the law which comes into effect from tomorrow. 

The law previously allowed the full costs of remediating residential blocks to be passed on to leaseholders. Gove said these expenses, which sometimes cost thousands of pounds, would “bankrupt families and leave leaseholders facing financial ruin”. 

He wrote: “Those days are now over, and the Act means qualifying leaseholders can thankfully dispose of these invoices.” 

The Act states that building owners must now draw on their own capital, the Building Safety Fund, or contributions from the industry levy to pay for construction to make residential blocks safe. 

Protections apply to leaseholders in buildings which are 11 metres, or five storeys, and taller. 

Gove said he was concerned that some agents were still sending invoices to leaseholders and warned that the protections of the Act would apply retrospectively. 

He added: “It is important to be clear – from tomorrow, anyone who chooses to breach the statutory protections will be committing a criminal offence. Individuals involved in such criminal activity could face up to 10 years in prison, in addition to the consequences for their companies. Criminal exploitation of leaseholders will be treated as a matter of the utmost seriousness.” 

 

Medium-rise fund 

Gove said “responsible” building owners will have already made plans ahead of the Act coming into law. He also said where a building owner’s developer has not pledged to fix properties, applications could be submitted to the Building Safety Fund which is due to reopen or they could apply for the medium-rise fund, which will be launched soon. 

“Relevant authorities have the power to compel responsible entities to fund and undertake this work. I hope that it will not be necessary to do so, but I must be clear that if I am not satisfied, I will act to protect leaseholders,” he added. 

UK plan for a ‘fairer’ rental sector includes ban on ‘no-fault’ evictions

UK plan for a ‘fairer’ rental sector includes ban on ‘no-fault’ evictions

The proposals are contained in a so-called white paper – a government policy document that sets out plans for future legislation. The proposals are designed, it said, to “redress the balance between landlords and 4.4 million private rented tenants” by providing “new support for cost of living pressures with protections for the most vulnerable, and new measures to tackle arbitrary and unfair rent increases.”

The white paper also said that “for too long many private renters have been at the mercy of unscrupulous landlords who fail to repair homes and let families live in damp, unsafe and cold properties, with the threat of unfair ‘no fault’ evictions orders hanging over them.”

The government would ban section 21 “no-fault’’ evictions – allowing landlords to terminate tenancies without giving a reason – and extend the Decent Homes Standard to the private rented sector. More than a fifth of private renters who moved in 2019 and 2020 did not end their tenancy by choice, the government said.

Some of the other proposals include:

The announcement is part of the government’s so-called levelling up mission by trying to cut in half the number of poor-quality rented homes by 2030.

Positive impact

Reacting to the proposals, Paul Wootton, Nationwide’s director of home, said: “When implemented, the proposals outlined in this long-awaited bill will have a positive impact on housing quality and conditions for tenants and provide much-needed clarity on rules and regulations as well as additional support for landlords.

“As a buy-to-let lender we are keen to understand more about how the changes will be implemented, to ensure we fulfil our important role of balancing the needs of landlords as well as tenants. We are keen for the legislation to be delivered as soon as possible as the rising cost of living is continuing to exacerbate the issues the Renters Reform Bill is looking to address.”

Ben Beadle, chief executive of the National Residential Landlords Association, said: “Whilst headline commitments to strengthening possession grounds, speedier court processes and mediation are helpful, the detail to follow must retain the confidence of responsible landlords, as well as improving tenants’ rights.”

Eventual legislation, he said, “needs to recognise that government actions have led to a shortage of supply in the sector at a time of record demand. It is causing landlords to leave the sector and driving up rents when people can least afford it.”

Eddie Hooker, chief executive of the Hamilton Fraser Group, which operates industry schemes such as Total Landlord Insurance and Client Money Protect said:A more effective legal framework will ultimately help to create a more stable market for landlords to invest in. These proposals confirm the direction of travel, but the devil will be in the detail of the legislation.”

He said it was vital “that the eventual legislation doesn’t deter landlords from the sector as this will cause more landlords to exit, exacerbating an existing shortage of rental homes and driving up rents at a time when interest rates are rising faster than they have done in decades, and when people can least afford it.

“Whilst landlords are frequently portrayed as fat-cat institutions that have no regard for tenants, the truth is that most are decent people with just one or two investment homes which form part or all of their income or retirement plans and to continue to squeeze them would be counter-productive.”

To support the estimated 2.3 million private landlords, the government proposals include: 

Pet-friendly

Jeremy Leaf, a North London estate agent and a former residential chairman of  the Royal Institution of Chartered Surveyors (RICS), addressed the pets clause, saying “In principle, we welcome the announcement that tenants will have the legal right to keep pets. However, the most important question with any new rule affecting the private rental market is – does it pass the test of not reducing the number of properties to let and is it likely to increase rents? The answer in my opinion on both counts is – yes, provided it is fair on landlords and tenants.

“Landlords must not unreasonably withhold properties from tenants with pets whereas, on the other hand, tenants should have a legal duty to cover the cost of any damage made by their pets. The change should improve letting activity in theory bearing in mind we find the single biggest reason why private tenants move is to find pet-friendly properties.”

Owners who are “reluctant to embrace the new arrangement will probably find – as we do – that tenants with pets tend to stay longer and keep properties in better condition,” he added.

 

We won’t hit housing targets, admits Gove

We won’t hit housing targets, admits Gove

Michael Gove (pictured), the secretary of state for levelling up, housing and communities, told his department’s select committee yesterday that while housebuilding had hit record highs before the pandemic, a “number of economic headwinds” had made it more difficult to produce the 300,000 new homes that the government had targeted.

However, he argued that the target remained in place and that the government will do everything it can to meet it, despite the factors which will “make it more difficult” to achieve.

Recent analysis by Unlatch found that the government missed its target by 40 per cent in 2021.

Gove also confessed that the government has not yet worked out how it is going to fund its new Right to Buy scheme.

The initiative was announced last week, with the aim of allowing housing association tenants to purchase their homes at discounted rates, depending on the length of their tenancy.

However, Gove admitted that he was not yet in a position to explain how it would be funded, other than that it would not come from his department’s existing budget.

He said: “By definition we better crack on, because we can’t necessarily have the conversations with housing associations we’d like without having a great degree of assurance of funding. That’s entirely understandable on their part.”

Johnson launches mortgage market review and confirms Right to Buy extension and benefit changes

Johnson launches mortgage market review and confirms Right to Buy extension and benefit changes

In a speech given in Blackpool today, Prime Minister Boris Johnson said that 2.5 million tenants renting from housing associations would be given the opportunity to buy them outright.

He said the government would work with the housing association sector to design the scheme and it would also commit to building replacement homes for each one sold.

Johnson said: “Just as no generation should be locked out of home ownership because of when they were born, so nobody should be barred from that same dream simply because of where they live now.

“For four decades it has been possible for council home tenants to use a discount to buy the property they live in.”

He said that since its launch Right to Buy has helped two million people into homeownership and it had allowed people to be in “charge of their own family home, able to make improvements and add value as they please”.

First time buyers

Johnson added that the government would change rules so 1.5 million people who are in work but on housing benefit could use it towards a mortgage, rather than it going directly to a private landlord or housing association.

Johnson also confirmed that it would launch an “independent review of access to mortgage finance for first-time buyers” with the aim of widening access to low-cost, low-deposit finance.

He said that rising house prices, mortgage lending restrictions and high deposit requirements were limiting the number of young people that could buy a home. He pointed out that half of today’s renters could afford the monthly cost of a mortgage but only six per cent could secure a first-time buyer mortgage.

“First-time buyers are trying to hit a continually moving target. By the time they’ve put aside money to secure their mortgage, prices have risen and it’s no longer enough. And of course the global rise in the cost of living is only making life harder for savers.

“So we want it to be easier to get a mortgage. Reporting back this Autumn [the review] will look at how we can give our nation of aspiring homeowners better access to low-deposit mortgages,” he explained.

Levelling Up Secretary Michael Gove said that extending Right to Buy and launching a review of the mortgage market showed it was “backing first-time buyers, breaking down barriers to homeownership and delivering on the people’s priorities”.

He added that it would change rules to encourage those claiming Universal Credit to save for a deposit. Current rules mean that the amount of Universal Credit declines if someone’s savings exceed £6,000 and stop when the exceed £16,000.

Gove continued that it would make Lifetime ISAs exempt from these rules, so people could put aside a little each month for a deposit without impacting Universal Credit payments.

The government will also change the timeline for its support for mortgage interest loan, which aims a loan that helps claimants pay interest on mortgages, from nine months of unemployment to three months.

It said that this would “incentivise people to find work again and bring government into line with what lenders offer in these circumstances”.

Gove said that he would bring forward its commitment to deliver one million new homes by the end of this parliament.

Proposals fail to address supply and demand issues, industry says

Dan Wilson Craw, deputy director of Generation Rent, said that Johnson had “failed to set out action to deal with the unaffordable level of house prices and rents”.

“Neither the review of low-deposit mortgages, nor extending Right to Buy to housing associations will address the shortage of homes we need in places people most want to live. For that we need a programme of social house building beyond the one-to-one replacement of homes bought under Right to Buy,” he explained.

Wilson Craw said that expanding eligibility of Universal Credit to people saving towards a deposit would “restore some fairness to the benefits system” but there were more people with no savings struggling to find somewhere to live with current Local Housing Allowance rates.

He added that broadening housing benefit to cover mortgage payments was unlikely to help people currently receiving benefits to secure a mortgage as they would not pass lenders’ affordability tests.

Marc von Grundherr, director of Benham and Reeves, said that previous initiatives which permitted social tenants to purchase their properties had backfired and caused a significant shortage of stock which had driven up property prices.

He said the commitment to replace the stock might mitigate this but that the government’s track record on delivering homes was “woeful at best and social housing has long been an area of serious neglect”.

“To allow them to auction off existing housing association stock while also failing miserably to replace it would be a big mistake indeed,” added von Grundherr.

Councillor David Renard, housing spokesperson for the Local Government Association, said extending Right to Buy could help more on the housing ladder, but proposals should not lead to a fall in affordable social housing.

“Any houses sold must be replaced quickly, in the same local authority area and on a like for like basis. Equally, the cost of discounts must not be funded from the sale of council housing stock, nor be met from existing government funding commitments for delivery of additional affordable homes,” he said.

Renard said that the Right to Buy scheme for council tenants needed “urgent reform” and councils needed to be able to keep 100 per cent of receipts and set discounts locally.

“The number of new council homes being built is not able to keep pace with those sold under Right to Buy, and the discounts available, along with the funds that have to be returned to Treasury, are leaving councils with less and less resources to catch up,” he noted.

Benefits changes raises questions for lenders

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said that he understood the logic of reducing the benefits bill, but this was dependent on housing prices continuing to rise rapidly.

He added: “The other point is that it relies on lenders taking on borrowers who are on benefits, as they are often the ones who are struggling not just with raising deposits but making repayments.

“They are often on lower salaries and struggling to make ends meet, so would lenders take them on from a commercial point of view without some sort of guarantee from the government that they will meet their repayments?”

Vikki Jefferies, proposition director at Primis, said that the plan to help lower-paid workers use housing benefit and make monthly payments should be “welcomed”.

“This kind of government intervention is vital in encouraging greater homeownership in the UK. With average rents rising by a further 1.1 per cent in May, this policy will also support those who are trapped paying large proportions of their pay packets on rent.

“However, while government action on affordability is encouraging, there is still a broader issue here – the lack of affordable housing stock. It will therefore be important to see if the government’s promise that each housing association property sold will be replaced by another actually comes to fruition,” she said.

Boris Johnson to extend Right to Buy and allow housing benefit for mortgage payments – reports

Boris Johnson to extend Right to Buy and allow housing benefit for mortgage payments – reports

In a statement from Downing Street, the Government said Johnson would reaffirm in a speech in Lancashire today his “ambition to unlock the opportunity of home ownership for more people through helping those in a position to buy, to access the mortgage finance they need, ensuring people are incentivised to save for a deposit no matter their financial situation, and improving the supply of housing across the country”.

Media reports have suggested that this would include extending Right to Buy to housing association tenants.

Currently, Right to Buy allows most council tenants to purchase their council home at a discount if they meet certain criteria. This includes if it is their main home and self-contained, if they are secure tenants and have had a public sector landlord for three years.

A report from The Times suggested the maximum discount could be up to 70 per cent, but this was not confirmed by secretary of state for Levelling Up, Housing and Communities Michael Gove on LBC this morning.

The report also said that Gove had secured agreements with housing associations to replace every property sold with another to ensure social housing stock is maintained.

On LBC Gove said many people on in-work benefits were already paying significant sums in rent, and if this was converted into mortgage repayments then they would be able to “handsomely meet their mortgage repayments from their overall income”.

He added: “One of the things I want to do is extend home ownership across the country, and there’ll be many people in the North, the Midlands and the South West who will be well able to get on the property ladder using the amount they currently earn and receive in Universal Credit.”

According to the National Housing Federation, housing association provide homes and support for around six million people across England.

Another possible proposal would be allowing borrowers to use housing benefits to secure mortgages and make monthly payments.

Currently lender attitudes to benefit income are mixed, and are more cautious if it is the sole form of income or exceeds more than half of the would-be borrower’s total income.

According to Criteria Brian, 20 lenders will potentially accept income where it is primarily made up of benefits. This compares to 50 lenders who said they will not accept income which is mainly made up of benefits.

The latest statistics from the Department for Work and Pensions state that are around 2.6 million people are on housing benefit in the UK.

Reports also suggest that Johnson will launch a review of the mortgage market to explore ways to reduce the deposit needed by borrowers to secure a mortgage.

 

Proposals are ‘demand-sided’ and don’t address supply issues

Andrew Montlake, managing director of Coreco, said that the benefits proposal was “a bit strange and not sure lenders will like it”.

He said: “Using benefits, especially housing benefits or universal credit is not ideal to base a mortgage on and even if it is used it is unlikely to boost borrowing eligibility that much to make a big difference.”

He added that there were questions around eligibility, as borrowers circumstances could change and policy changes could alter eligibility.

“If someone is relying on it and it gets taken away or reduced then that is a risk if the mortgage then becomes unaffordable,” Montlake added.

He said the Right to Buy extension could help some but it was a “bold claim” to say that every household sold would be replaced as the government has failed to meet its housebuilding targets.

Montlake said a review of mortgage market to see if deposits could be reduced was “farcical” as borrowers could get a loan with five per cent deposit and reducing that could risk negative equity.

“All of these schemes seem to be demand sided that keeps the prices of properties high without addressing the real supply side issues. The government would be better off to nationalise a housebuilder and build their own affordable housing in places people want to buy or create new places complete with infrastructure that make it appealing.”

Chris Sykes, technical director at Private Finance, said that it was a “nice sentiment” but it was unclear as to how it would work.

He pointed out that to qualify for housing benefit you needed to have less than £16,000 in savings, so that would make raising a deposit challenging.

Sykes added: “Through the Right to Buy scheme you can use the discount as deposit it often isn’t enough as often it will be lower earners in the property so cannot mortgage as much as they’d hope.

“Then by nature of you being on housing benefit your other income will be low, so especially with the cost of living affecting lenders affordability those on lower income will have lower and lower borrowing capacity, lenders need there to be excesses in affordability and if you are living on the breadline then it is unlikely that you have the excess in affordability necessary, as well as the fact lenders generally use ONS data on expenditures, where those on benefits might have much below ONS spending averages due to where they shop, what they have to eat and so on.”