As a Cornwall-based UK company we are fully aware of the problems caused when property price rises outstrip local income levels. The Lib Dems are right to put affordable housing at the top of their social agenda and we agree that something drastic needs to be done. However, their proposal is probably not workable – an Englishman’s home is his castle even if he doesn’t live in it; besides which the costs to councils of taking over such properties would be massive. There is already a law of ‘adverse possession’ which allows a squatter to claim property openly occupied for over 12 years as theirs. The Lib Dem proposal is unlikely to do more than the existing law.
We specialise in non-conforming mortgage solutions to widen the opportunities of home ownership. What is needed is an extension of the right to buy scheme to put first-time buyers on the property ladder and finance more affordable council housing.
Park Row Independent Mortgages
The Lib Dems plan to force absentee landlords to either renovate and rent empty properties or, failing that, give local authorities the power to take over empty properties is to be applauded. After all, local authorities have had compulsory purchase powers for some time and this is an accepted part of the local government powers. It makes sense when there is such a shortage of affordable housing to extend these powers to compulsory leasing.
Between 1991 and 2001, growth in housing demand outstripped supply by over 400,000 households. On current trends, a housing shortfall of 1.5 million is predicted within 20 years.
A recent report highlighted that around 84,000 family units and individuals are officially designated homeless in England, while countless others on low incomes struggle to find a place of their own. Yet, at the latest count, England had 729,770 empty homes, and the picture is not dissimilar in other parts of the UK. The carrot-and-stick approach that the Lib Dems advocate is attractive because, if private landlords do not respond, compulsory leasing will provide a more powerful weapon in the local authorities’ armoury.
While I am (at present) a Blairite, the Lib Dem proposal to empower councils to take over empty properties and lease them out gets my vote. The proposal may prove difficult to enforce but any constructive initiative should at least be given a ‘pilot’. Let the public ‘try before they buy’ into the idea.
We have recently seen initiatives from lenders prepared to increase the ‘income multiples’ – use parents as ‘guarantors’ – the rebirth of 100% mortgages and interest-only mortgages without the need for a repayment vehicle. So let us go with the Lib Dems.
One unpopular initiative that all politicians will shy away from could be to re-introduce capital gains tax on the sale of a home, in particular a second home, that is, buy to let homes. Let us see if there is a political party brave enough to propose the capital gains tax. My advice: do not hold your breath.
Any initiative to deal head on with the housing shortage in the UK has to be regarded as positive. We can see from right to buy, shared ownership and shared equity propositions, that affordable housing is both necessary and popular. So Edward Davey’s statement probably starts with the right motive, but I don’t believe the proposals are universally or easily deliverable.
It does stagger me that so much property owned by local authorities stands empty and I wholly agree that great pressure should be brought to bear so that this trend is reversed. However, I accept that this requires significant funding just as much as it does change to policy.
In terms of somehow compelling private owners to make empty units available, I doubt any government could pull off such a prescriptive approach. You cannot spend decades encouraging private property ownership, then turn the tables and exercise draconian controls.
Association of Mortgage Intermediaries (AMI)
We all recognise the need for affordable housing – especially for those providing a community service. It is easily won political capital for any party to stand up and promise affordable housing solutions for care workers (usually accompanied by pictures of pretty young nurses) and the like.
The evidence AMI submitted to Kate Barker’s review of housing helped in setting out the mortgage intermediary view of housing liquidity. This goes beyond building cheaper houses in the South East.
The housing market is built on the foundations of planning, building, finance and market demand. The interplay between these is essential to the smooth working of the market.
Any political proposal that simply ends up freeing housing in an area where there is not the demand will fail. The northern industrial cities have suffered from declining populations as people move south in search of jobs.
The first stage of proposals: the ‘carrot’, seems to make a great deal of sense. It must be in everyone’s interest to make better use of properties that stand idle and fall into disrepair because of neglect. Improved information on, and access to, grants is a tremendous step in the right direction.
Turning to the ‘stick’ element of the proposal, I am always nervous about compulsion in any market. However, if the landlord ends up with a better property and the tenant has a better quality of house, it appears like a virtuous solution to the problem
l For more on the thinking behind this proposal, see page 34