Coalition is difficult when your philosophy on life is so different from your partners. The announcement in George Osborne’s emergency budget that housing benefit is to be slashed (a benefit that goes largely to people who are working but low paid – not simply to Cameron’s “benefit scroungers”) clashes directly with Eric Pickles decision to set council’s free from affordable home building schemes. It creates a perfect property storm which, as a Liberal Democrat who believes in social justice, I cannot agree with this, however bleak our financial situation.
The result is a trap from which only those who already have their own homes can escape. Cutting house building will keep property prices artificially high – and therefore private sector rents, as well. Cutting housing benefit will make it impossible for many thousands of families to afford adequate accommodation. The long term cost of this is further social disruption, poorly educated young people and increased crime – all of which will cost Britain more in the long run.
In addition, those employed young people who are working to better themselves will be caught in the trap because increased pressure on banks for fiscal responsibility and the lack of affordable housing will mean they cannot get mortgages. These are the people that we older ones will be relying on to run the country when we retire. We are letting them down.
There is an alternative, however; one which would cut benefit bills and help get young people on the housing ladder – a crash in property prices. If British housing reverted to the sort of value it had in the 1980s – about three times the average salary, rents could fall, benefits could fall and working young people could buy their own homes.
Having spoken to a developer about this, such a crash will only work if land prices tumble, too but there is another problem blocking this. City companies have spent many years buying up land whenever it comes onto the market. Although land banking in the 19th century started the honourable path to mutual building societies, these days it serves no productive purpose other than to make rich people richer – or to rip off naive investors. It also keeps the price of land artificially high by locking it away until the price is right, much as the De Beers company only lets its vast stocks of diamonds out in a trickle. At current exhorbitant land prices, developers cannot profit from “affordable” house building unless the government subsidises it, which Pickles refuses to do. This is a vicious circle in which productive business and the most vulnerable of the British public are caught. It has to stop.
There is no doubt that a property crash will be painful for some. Those who have ridden the property gravy train since the eighties will find their portfolios collapsing in value. This is not to be taken lightly as it includes pension funds and many honest individuals. It will doubtless cause problems in the markets, as well. The government will have to protect those whose mortgages suddenly exceed the equity in the houses and the building societies will have to play along. After all, the building societies were the reckless ones offering outrageous loans on limited proof of ability to pay.
It will be painful but these are short term issues and certainly not as damaging as the measures the Government is planning against the poorest of our society. In time, perhaps we’ll get back to remembering that a house is not an investment but a home. Whether you live in it yourself or rent it to someone else, a home for everyone is key to a stable society and a prosperous future for Britain.
Neville Farmer
Parliamentary Spokesman
Wyre Forest Liberal Democrats
