Can the government ever end this cycle of housing boom and bust? Can we all have access to affordable, good-quality homes. Can we reduce the financial risks that come with buying a property?
Here are three ideas.
1. Social Rented Homes
For many people on low and insecure incomes, a mortgage will always be too great a financial burden. Those people need affordable, good-quality, rented homes. The government recently gave £50 billion to financial institutions to take on their bad debts. It should give another £50 billion to local authorities to build social rented housing — in small clusters rather than the old-style estates. In the short term this will save construction jobs and in the longer term will make rents and property prices more stable.
2. Affordable Leaseholds
Many people could manage a mortgage if house prices were more reasonable. The government should also commission affordable housing for sale on leasehold. Rather than current schemes that provide only an initial subsidy, these homes must be permanently affordable. So the maximum price is set at a reasonable multiple of local median earnings, and the buyer is required to offer the house on the same basis when they come to sell. The property must also be the owner’s main residence, so they cannot be taken up by buy-to-let landlords. This approach would also help to make prices more stable.
3. Non-Recourse Mortgages
If a UK homeowner defaults on their mortgage, the mortgage lender sells the property to recover their debt. If the property is worth less than the mortgage, then the owner not only loses their home but still has the remaining debt. The government should require lenders to offer ‘non-recourse’ mortgages, where the lender can only recover the property. This allows the homeowner to ‘walk away’ without the property, but with no debt. This would both reduce the risk for homeowners and force mortgage providers to lend more carefully.
The financial services ‘industry’ and many right-wing newspapers will complain long and loudly about these initiatives. But the public have little sympathy for financiers and property speculators who have been lining their own pockets at everyone else’s expense.
We should all have a secure, affordable, good-quality home. This Labour government has a historic opportunity to help provide those homes. It must take it.