Danny Alexander writes… A good home should not be a luxury for the few, but an achievable aspiration for the many

Across the UK tens of thousands of aspiring homeowners find themselves in the same situation. They have steady jobs, reasonable incomes, but for them the dream of owning their own home is currently just that-a dream. It’s made even worse by the fact that they can afford the mortgage repayments on a new home.

The one thing holding them back is the cost of a big deposit. And without parents wealthy enough to give them a helping hand these aspiring homeowners will continue to be excluded from the property ladder. I don’t think our housing market should be shut off from people who are in this position.

Our housing market has got to be open to a wider range of people otherwise you end up with a situation where there are large sections of our population who are never going to be able to fulfil that dream of owning a home. I think it is right for the Government to step in and help those people. This morning I gave a speech to the Housing Market Intelligence Conference about how this Coalition Government is doing just that.

In the three decades before the financial crisis, mortgages of 90 and 95 per cent loan to value were a crucial part of getting first time buyers on the property ladder. In fact the median loan-to-value ratio for first time buyers only once dropped below 90% in the 25 years before the economic crash. At the beginning of 2008 there were 754 mortgage products available at 95% loan to value ration. Last August there were just 43 products. Our Help to Buy scheme will allow borrowers to apply for a mortgage with just a 5% deposit and will make up to £12 billion of government guarantees available; enough to support up to £130 billion of high loan-to-value mortgages

Yesterday I outlined more details of the scheme by announcing that Natwest, RBS, Halifax, and the Bank of Scotland have all agreed to be involved in the scheme. So if you go down to branches of those banks today you’ll be able to have, perhaps for the first time, a conversation about a mortgage that you might be able to afford. And that will mean that you can start the process of buying your house, something that an awful lot of people on low and middle incomes who don’t have wealthy parents to help them with a deposit would love to do but have been excluded from for quite a few years. As a Liberal Democrat, I’m proud that it is this Coalition Government that is helping those people.

One of the things that Help to Buy doesn’t change is that people still have to assure lenders that they can afford their mortgage. There are much more stringent tests now under the new regulations that our coalition Government has brought in to make sure that there are higher regulatory standards on banks in terms of affordability checks and credit checks. And those checks are not just about what people can afford now, but what they think they can afford in the future.

This is a three year, time limited scheme that will help creditworthy people who would otherwise struggle to afford a deposit on a home get on the housing ladder. In my view we are a million miles away from another housing bubble, but we are not ignorant of the risks, which is why we have built in a role for the Financial Policy Committee in the scheme to ensure that it responds to changes in the wider market

One of the reasons I believe our action to support buyers is sustainable, though, is because of the practical steps we’ve been taking to increase housing supply. The first part of Help to Buy, the equity loan scheme, will help get people onto the housing ladder whilst building more houses at the same time. By 2015-16, it is expected that up to 74,000 new build sales will have been supported through this scheme.

I also announced at the Spending Round the new Affordable Rent to Buy scheme as a new way to deliver extra homes built at sub-market Affordable Rent levels. This £400 million programme will provide funding for new build homes to be let to tenants at affordable rents for a fixed period of time, allowing them to save for a deposit. And at the end of this period, the sitting tenant will get the first option to buy the home and achieve their aspiration of home ownership.

At the Spending Round, I also announced that we will be providing over £3 billion more capital over the three years from 2015 to deliver 165,000 new affordable homes. That is an average of 55,000 affordable homes a year; more than in any year under the previous Labour Government and the most for 20 years. Unlike during Labour’s time in government, under the Coalition net affordable housing supply has increased, and will be increasing, in every year. That’s our party’s record of action in Government.

The Liberal Democrats have always believed that a good home should not be a luxury for the few, but an achievable aspiration for the many. That does require more homes to be built. But it also means helping those that can afford to buy their own home to do so. Our Help to Buy scheme will ensure that today’s young people are given the same chance of getting on the property ladder as their parents and grandparents.

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  • How about reforming the planning system so that houses can actually get built? How about letting local residents profit from some of the increase in land values that acquiring planning permission delivers so that they don’t hate local building so much?

  • I’m almost inclined to rejoin the party just to leave over this policy. It runs counter to everything I used to associate with the party and is deeply depressing. It builds neither a stronger economy nor a fairer society and, if left to run for any length of time, will actually go further than most policies to undermine both of those frequently-stated objectives.

  • Deposit or no deposit, how is someone supposed to manage a mortgage based on 3x salary when the average salary is a mere £26k and even a one-bed flat can be five or more times that?

    I’ve been working 20 years, pulled myself up to a very high level in my industry, and an average family house an hour’s commute away is *still* 4 times what I bring home.

  • Richard Marbrow 9th Oct '13 - 4:53pm

    “At the beginning of 2008 there were 754 mortgage products available at 95% loan to value ration. Last August there were just 43 products. ”

    The period that ended in 2008 was NOT NORMAL. There was a financial crisis that was massively contributed to by an unsustainable house price bubble. By seeking to portray the period before the financial crisis as something we need to get back to you are setting us up for another financial crisis. It wasn’t just about whether people could afford the mortgages it is the fact that house prices cannot continue to go up faster than earnings forever. That isn’t a policy point it is a mathematical one.

    The longer you put off the inevitable collision between house prices and reality the worse it will be. This policy is an artificial prop to house prices and ignores the fact that the reason that peoples parents and grandparents could afford houses is because houses were cheaper relative to incomes. This is actually going to make the problem worse!

  • Eddie Sammon 9th Oct '13 - 4:58pm

    I’m sorry, but Danny’s walked right into this one: a new car shouldn’t be a luxury for the few, where’s the government’s new car on the drive policy? Thatcher’s aspirational Britain, fill your heart with materialism!

    Whilst I agree with Danny’s message about being a million miles away from another housing bubble, I still disagree that it is a good use of limited public money.

  • So basically as this policy has united the different wings of party as the campaign against Secret Courts did, can we expect to be campaigning against it at the next election?

  • Adam Corlett 9th Oct '13 - 5:17pm

    Yes, what this country needs is for banks to lend more money to households through huge mortgages, rather than to businesses!

    As a young person, I can assure you I don’t want the government to use my own tax money to guarantee enormous loans – I want you to let people build the houses I and other young people want to live in and actually bring down their cost!

  • Fully agree with the headline. “Help to Buy” is not the way to go about achieving it, though.

  • Max Wilkinson 9th Oct '13 - 5:28pm

    There are two sensible ways to solve the problem.

    1. Build more social housing.
    2. Relax planning rules to allow more homes to be built.

    Underwriting £600k house purchases using public money is reckless and morally indefensible. I’m dismayed that Danny Alexander is supporting this policy.

  • “In my view we are a million miles away from another housing bubble…” I find that as a piece of phraseology rather disturbing from a senior Treasury minister. I rather doubt that he would find that most economists agreed with him.

  • Richard Dean 9th Oct '13 - 5:34pm

    For those who say “build more social housing”, I ask “where will the money come from?”

    If there was a profit in it at today’s prices, house-builders would already be doing it. Since they are not doing it, we can infer that social housing is built at a loss. Who, then, will pay the taxes needed to pay for the social housing?

  • Mr Alexander is quite correct to suggest that *another* housing bubble is a long way away. The previous one never actually deflated, it merely went from prices being insane relative to incomes to merely being somewhat ridiculous.

    Building more social housing can be financed via borrowing secured against future rental income. The big cost of building houses at least in the south remains land. The state controls the availability of land via the planning system so can and does influence the cost of building, sadly increasing those costs recently. Interest rates are currently at record lows and the government is borrowing a ton to fund current spending anyway. Far better the state builds housing than funding landlords’ mortgages via housing benefit.

    Could even cancel HS2 and use those funds to build the right homes in the right places rather than expanding the London commuter belt up to Leeds and Manchester.

  • Enabling people to take out bigger mortgages pushes house prices up. Higher prices are good for sellers and bad for priced out first-time buyers like me, yet you have the temerity to say that this policy is good for us. You’ve created poison and are selling it as medicine.

    Deposits are too expensive. Once interest rates leave their current record low, mortgage repayments will be too expensive. This is because house prices are too expensive.

    And you use ‘they’ and ‘them’ to talk about potential first-time buyers. We’re voters too Danny. How about talking to us rather than about us? You met with the housebuilders and mortgage lenders to discuss Help to Buy, but you didn’t talk to first-time buyer groups like PricedOut (that I’m a director of), despite the policy purportedly ‘helping’ us.

    Oh and the Affordable Homes Programme needs to be trebled to get to the scale that will have the necessary impact.

  • Richard Dean 9th Oct '13 - 5:58pm

    If “building more social housing can be financed via borrowing secured against future rental income”, and if that produced a profit, then builders and/or entrepreneurs would be doing it. They’re not, so we can infer that someone will make a loss. The someone is going to be taxpayers. Which taxpayers will pay for housing for other people who are in housing at the moment?

  • Prateek, if we need to build 250k houses per year, assuming a three-year development pipeline we’d need there to be 750k plots with planning permission that aren’t built on yet. That also assumes that every single plot is viable at the current time, which it might not be.

    I believe there are currently around 400k plots with planning permission but not building started? That doesn’t seem like very many in contrast to the problem.

    The problem with planning is a simple one. Any council that grants enough planning permission to start to alleviate the problem will be voted out. The disadvantages to the property-owning majority will see this always happen. In Maidstone, for instance, the Tories are trying to build 14,800 new houses and the local Lib Dems are fighting against this tooth-and-nail (and we’re likely to take the council from the Tories over it shortly).

  • Tommy, the 400K figure if from the Local Government Association and is for uncompleted houses with planning permission. Most of them are under construction. It’s a total red herring used by LGA to argue that they aren’t to blame for housing shortages. It smacks of complacency from them when there is far more they could be doing to resolve the housing crisis – e.g. how about planning authorities stop deliberately underbaking the measurement of housing need in order to minimise housing targets in their local plans.

  • I strongly suspect that neither the mandarins or the politicians at the Treasury believe this is a remotely sensible policy. In fact somewhere out there is a video clip of Osborne as shadow chancellor roundly condemning public mortgage subsidies. Sadly, I can’t track it down.

    So, if I’m right and the Treasury doesn’t believe this is a sensible plan, then WTF. Could it be that this is Osborne’s covert ‘Plan B’? I think so. Remember that just a few months ago Plan A had clearly failed (even the IMF thought so) and there were loud calls for Plan B – generally interpreted on the left-leaning end of the spectrum as massive deficit spending by government but which the Conservative are viscerally opposed to. But with the election drawing closer Osborne had to do something, some sort of Plan B but obviously not the one the left was calling for or his own backbenchers would have called for his head.

    His options included making the economy actually work better but that would involve attacking powerful vested interests. So perhaps he concluded that the only option was a desperate bid to reignite the property Ponzi (for that is what it was) that played such a large part in getting us into this mess in the first place. Whatever the thinking the fact is that that is what he’s done and, in the short term, it’s working – property prices are booming and Conservative voters are happy (well, those who are clueless about economics). Even the IMF says it’s impressed.

    One problem is that soaring house prices will eventually cause rents to rise and with them rent support payments increasing government spending even as Osborne tries to cut it.

    Eventually, inevitably, the bubble will burst but presumably Osborne hopes to keep it going until after the next election.

  • Of course the small herd of elephants in the room that no-one is talking about is immigration.

    Danny says that by 2015-16 up to 74,000 new build sales will have been supported through the scheme and that from 2015 a further £3bn will be provided to deliver an annual average of 55,000 affordable homes over three years.

    For comparison in the year to June 2012 net immigration was estimated at 163,000 and the Conservatives aim to get it down to 100,000 per annum by 2015.


    In other words, we will still be going backwards on housing just on the basis on ongoing immigration and even without any provision for catch up of the backlog. Can anyone say sustainable with a straight face?

  • You may be on to something GF. Plan ‘A’ = Austerity. Plan ‘B’ = Bubble.

  • David Allen 9th Oct '13 - 7:04pm

    The State is robbing the taxpayer to fund a madcap Socialist scheme – which will distort the free market, and give Government apparatchiks control over where ordinary families are able to live!!!

    Fortunately there is one Party who have now put doctrinaire Marxism behind them, and can be relied upon to oppose this loony Left policy – Ed Miliband’s Labour Party!

    Vote Labour to get rid of the Commies who run the Tory Party, and their “fellow travellers” in the Lib Dems. You know it makes sense!

  • Richard Dean 9th Oct '13 - 7:09pm

    This is nowhere near a plan B. It’s tiny in the economic scheme of things.

  • Duncan, I think we’re in agreement really? I was saying that 400k is totally inadequate?

    I was under the impression that most local authorities were getting their local plans thrown out where they didn’t contain massive housing numbers?

  • “There is little systematic evidence on the impact of immigration on house prices and rents in the UK. Some evidence suggests that the housing shortage in the UK would continue even with zero net-migration”


  • ‘Richard Dean 9th Oct ’13 – 5:58pm
    If “building more social housing can be financed via borrowing secured against future rental income”, and if that produced a profit, then builders and/or entrepreneurs would be doing it. They’re not, so we can infer that someone will make a loss.’

    Afraid not. You assume that supply of housing in the UK is a function of demand – it’s not. We have the most unresponsive housing supply relative to demand in the G20.

    The primary driver of builders isn’t volume, it’s margin. Thanks to how things are set up it’s extremely difficult for smaller builders and self-builders to compete with the larger builders. I live on a new build estate of about 1500 homes that’s been in construction for NINE YEARS – the consortium continue to build slowly to avoid flooding the market and maximise the profit on their land purchase.

    Also as I said changing the supply of land is a key part of making things work. Land is massively overpriced due to artificially restricted supply. Resolve or mitigate that for affordable housing and the maths work.

  • A little light reading in fact showing the chart of how inelastic housing supply is in the UK against demand.


  • Richard Dean 9th Oct '13 - 7:50pm

    I assume no such thing. I wonder if you’ve got supply and demand mixed up in your head? Also, real demand isn’t what people want, it’s what people who have the ability to pay want.

    I am saying that the primary driver of supply is margin and the fact that driving isn’t happening shows that margins or profits are not enough to induce a significant increase in supply. That’s what Ed Conway’s sixth graph is showing too. The way out of that trap is to increase prices, or decrease costs. Help to Buy Phase 1 should help decrease builder’s borrowing costs, because it reduces the risk that what they build won’t sell.

    If your consortium is having to avoid flooding the market, it’s an indication that the market (ie.real demand, demand that has the ability to buy) is small. Help to Buy Phases 1 and 2 should help this situation a bit, since they increase the number of people who will be able to get a mortgage – they increase real demand.

    Danny Alexander has delivered a policy the LibDems said they wanted – more people able to get onto the housing ladder, at least in the short term. So why the complaints?

  • @GF
    You’re missed the other herd of elephants (or are they a pack of hyena’s?) in the room – the foreign investor…

  • Andy Boddington 9th Oct '13 - 8:46pm

    This is a classic Tory agenda of home ownership for those that can achieve it being more important that getting people into good housing. So many people need homes. Even more need decent homes. This policy gets us nowhere near close.

    Sorry Danny, but you are way off mark in supporting this.

    It is time for the Lib Dems in the coalition to forge a really distinctive housing policy that is not kowtowing to the Osborne Cameron agenda.

  • @thomas long- sadly you are so right and not just in Maidstone , compare and contrast……



  • Peter Watson 9th Oct '13 - 9:13pm

    This thread leaves me quite confused.
    In 2015, should I be persuaded to return to voting Lib Dem because so many in the party are opposed to daft policies like this, or should I be persuaded to stay away because senior Lib Dems are promoting them?

  • I’ve been a “home-owner” (= mortgage-holder) a couple of times. In the early 1980s we got a 95% mortgage – 80% at one interest rate and the other 15% at a higher rate – but prices were such that repayments were OK. We bought in the south at £22000, then moved north a few years later for £50000 – a nice 3-bedroom detached house. By 2007 it was around £350000. Strangely enough, salaries hadn’t gone up seven-fold in that time. And those were the good old days.

    If ownership is the thing, then prices have to fall – ideally by a small amount a year over rather a lot of years. If affordability is what we’re after then we’d better make renting doable for far more people, which will disadvantage a lot of the current landlords. Whatever, we need either more houses (and a geographic shift of the economy) than anybody has dared to suggest, or something more restrictive and probably rather Victorian.

    We, as players in the social and political games, have made the thing untenable over the years, and propping up a tottering edifice is useless… unless it’s just a desperate 2015 election bribe of course.

  • Many people on here have rubbished my comments when I have suggested that there is something to be looked at positively in 60s and 70s economics. I think the powers that be need to re-evaluate that period to see what we need to do vis a vis housing. Agree with Ed Wilson above that to get where we need / many of us want, to be, it will take quite a period to allow adjustment to various aspects of life. And, of course, at a time when we should be hurriedly decarbonising, and minimising our resource use in all sorts of ways. Time for a new economics! Or at least some new and revised key economic indicators.

  • Paul Pettinger 9th Oct '13 - 9:39pm

    @Danny Alexander. ‘We are not ignorant of the risks’ – who is we and what are the risks? If you mean that house prices may be further fuelled then, by your logic, so the Government should only invest even more in its scheme, otherwise more people without wealthy parents will be locked out from owning their own home. You have created a giant Ponzi scheme. You are also reducing the benefits of those who are not able to find a property to down size to, while subsidising those who can already afford to pay a mortgage.

  • Paul in Twickenham 9th Oct '13 - 9:44pm

    Mr. Alexander does not appear to have convinced anyone here. If the Liberal Democrats were in opposition and the government proposed this exact scheme, what would be the party’s response?

  • Caracatus at 9:556pm – until now I’ve wanted to argue. Now I just shake my head and agree.

  • nuclear cockroach 9th Oct '13 - 10:14pm

    This is nonsense. Even George Osborne knows it, but he just wants to buy a few Tory votes. What’s Danny Alexander’s excuse?

  • jedibeeftrix 9th Oct '13 - 10:19pm

    “Across the UK tens of thousands of aspiring homeowners find themselves in the same situation. They have steady jobs, reasonable incomes, but for them the dream of owning their own home is currently just that-a dream.”

    Danny, what I want you to understand is that a very significant part of that dream is the notion that my home is my castle. A notion that is antithetical to principle of land value taxes.

    “Let everyone have houses, that we may tax you more” is not exactly in the founding spirit of liberlaism.

  • This article rivals Owen Patterson for sheer bloody-minded adherence to a political line in the face of evidence to the contrary, which is really saying something today. It might have been funny if the economic and housing situation were not so serious.

  • Paul Pettinger 9th Oct '13 - 10:31pm

    As Caron Lindsay recently posted: http://www.youtube.com/watch?v=TLf7Oq0hK1M

  • David Allen 9th Oct '13 - 11:08pm

    “In 2015, should I be persuaded to return to voting Lib Dem because so many in the party are opposed to daft policies like this, or should I be persuaded to stay away because senior Lib Dems are promoting them?”

    Stay away. You need to vote on the basis of what will actually happen. The Clegg leadership seek to support an ongoing Tory-led coalition, and if you vote for that, you may well get it.

    I have been a member since 1981, and I am on strike. I will not work for this leadership.

    Increasingly I think that being on strike – though a better response than many have made – is not enough. If we want a party which rejects pale orange Toryism, then we need to create one. Which means destroying what is there now.

    That is not easy to say when you have spent half a lifetime working at local level to make it grow. But if it is not done, the Liberal Democrats will continue in their new guise – As a potent force for harm.

  • Martin Pierce 9th Oct '13 - 11:34pm

    Danny if you had any liberal or Liberal bones in your body – or possibly just an economist’s – you would know this is JUST PLAIN WRONG

  • I’d expect some critical comments, but nobody here is backing this policy.

  • “In the three decades before the financial crisis, mortgages of 90 and 95 per cent loan to value were a crucial part of getting first time buyers on the property ladder. ”

    Aside from the fact that there is no such thing as a property ladder – a phrase used exclusively by spivs and those they’ve managed to con – it really isn’t justifiable to compare the 95% mortgages being lent immediately before the crash of 2007-2009 to the 95% mortgages being lent a decade or two earlier. The banks changed their lending criteria and extended their loan-to-income ratios over that time period. Loans used to be around a maximum of 3 to 3.5 times the borrower’s income. The problem with the 95% mortgages being offered before the recent crash was that the loan-to-income ratio had increased to typically 5 times the borrower’s salary. 5x salary with a 25% deposit is reasonable. 3x salary with a 5% deposit is reasonable. 5x salary with a 5% deposit leads to short-term excess profit taking by the banks and a short-term increase in house prices, until the inevitable crash.

  • Crash of economy but not actually of house prices.

  • I’m afraid I got to here:

    “The one thing holding them back is the cost of a big deposit.”

    And stopped reading. Could I really be reading a liberal Chief Secretary to the Treasury, the first in many decades (bar 17 days)? Danny, write out, 1909 times, in chalk, on the outside wall of the Treasury, please:

    “The one thing holding them back is the cost of land.”.

  • Mike Barnes 10th Oct '13 - 2:10am

    Leaving aside the economic arguments (the 50 previous comments just about cover that!) the lack of tactical judgement is staggering.

    George Osborne’s face is all over this scheme. If the people like it and enjoy their new homes before the next election, he will be the winner. The Conservatives get the votes, not the Lib Dems. He doesn’t have to worry about what happens after the election when the scheme ends and suddenly house prices start falling again and lots of new home owners are stuck in negative equity, unable to move up the ladder.

    The policy will turn off plenty of your own voters though. Ed Miliband already fluttering his eyelashes at them with his housing and energy policies. This only has downsides for the Lib Dems, It’s the same old story of the coalition, you do all of Osborne’s work for him but you really won’t get any credit for it you know. He tactically outplays you with virtually every policy.

  • Richard Dean 10th Oct '13 - 3:02am

    Land is costly because many people want it, so the way to reduce its price is to persuade people to not want it.

    Building more houses won’t do that – the new houses will use up more land and so reduce the supply and therefore increase the price. Taxes on landowners won’t work, because the owners will just increase the price by the amount of tax.

    One way might be to persuade people to want land somewhere else – build a new town, or move to a place where there are empty houses. Sounds like a good reason to start to address the SE/rest of the Country divide, and encourage people to move out of the South East.

    Another way might be to want land that no-one else wants. Derelict land. Contaminated land. Run-down areas. Sounds like a great motivation for regeneration activities – and there are plenty of places outside the South East where that could be very welcome.

  • jenny barnes 10th Oct '13 - 9:01am

    When even the Economist, not known for its left wing views, thinks this policy is mistaken, I think we can be pretty sure it is. I sighed on Monday when DA pitched up on Today – another indefensible Tory policy being defended by a disposable LD. Sigh.

  • Matthew Huntbach 10th Oct '13 - 9:48am

    Danny Alexander

    The one thing holding them back is the cost of a big deposit. And without parents wealthy enough to give them a helping hand these aspiring homeowners will continue to be excluded from the property ladder. I don’t think our housing market should be shut off from people who are in this position.

    Yes, fine – this illustrates how we have a dangerous feedback whereby money from house price rises is fed back through inheritance into further house price rises.

    The point made by the supporters of Help to Buy (which amount to Danny Alexander and a bunch of Tories) that it evens out the balance a bit IS a good one, but for that argument really to work, they need to tackle the bubble effect of pushing yet more money into house prices. Well, that’s simple isn’t it? Balance the inflationary aspect of Help to Buy by taking away some of the other money pumped into house prices – increase inheritance tax. How about it Danny? Propose it, and it stops you looking like someone who lacks basic economic sense and differentiates you from the Tories.

  • @ Richard Dean (comment at 7:09 yesterday)

    Sure the amount of Help to Buy is small in relation to HS2 etc. but that’s not the proper measure. Some in the Treasury have presumably belatedly realised that it is impossible for the private sector and the public sector to reduce their debts at the same time without crashing the economy as a result of cash flow being diverted from consumption and/or investment spending into debt repayment – which creates no jobs whatsoever. (The only way out of this bind is if exports are surging and providing the demand that isn’t being generated domestically – but that’s not the case here).

    So, the combined total of public + private debt must be maintained or even grow to put demand into the economy. Since public is anathema to the Conservatives and they would really like to reduce it, that means that private debt must be persuaded to grow. This has the handy side effect for powerful Tory backers (i.e. the City) that it increases their profits while the downside risk if it all blows up is already insured against via the Help to Buy guarantee in yet another example of privatising the profits and socialising the losses. Thanks Danny!

    Hence Help to Buy is a classic bit of ‘pump priming’ to set in train larger movements including general house price rises – which it seems to have done rather handily along with other measures like (as Roland correctly points out above) the foreign investors invited to turn our housing stock into gambling chips for international speculators.

    @ Louise Shaw (comment at 7:20 yesterday)

    Re impact of immigration. I don’t think the link you provide says what you appear to imply. ” little systematic evidence ” means only that there isn’t a substantial body of academic work on the subject. The normal laws of supply and demand suggest that the impact is huge even if not studied and quantified. And, for what it’s worth, I rather agree that there will always be a shortage of housing to some degree. I would like to think that over time we could replace older housing that’s poorly designed, cold etc. with better modern units. Even if this was happening there would be a shortage of housing (meaning good housing) as aspirations increased.

  • Richard Dean 10th Oct '13 - 1:31pm

    If “there isn’t a substantial body of academic work on the subject”, then the most likely explanation in a free society is that the subject isn’t significant enough to warrant funds being spent on it or work being done on it. Academics love to receive research funds – their careers depend on it – so if anything is worth investigating they’ll find it!

  • If we really want to ‘help to buy’ we should be abolishing Stamp Duty, a utterly perverse tax dating back to the 1700’s that loads cost onto the very people who can’t afford it (the buyers), while those who are selling their house completely escape tax due to Primary Residence Relief.

    If we really wanted to help buyers and stop property bubbles we’d scrap stamp duty and raise revenue from the profits on sales of homes. If a house has increased by more than say 5% year on year we could tax that socially damaging excess profit and use the money to build new social housing in that area, increasing supply in parts of the country where the market is overheating.

    Its probably too politically unpalatable to implement as those sitting on massive housing gains would feel the brunt of the tax, but something that equalises the market, dampening profits in boom areas but helping less buoyant markets is what’s needed. The housing market isn’t national, its a whole series of local markets in completely different circumstances.

    More here if you’re interested http://liberalnorth.wordpress.com/2013/09/23/some-thoughts-on-property-bubbles/

  • @GF On immigration and housing – the link I provided says literally what my comment said, as it was a direct quote from it.

    Today’s revelation – Osborne is hoping this will create another housing boom:

  • Liberal Neil 10th Oct '13 - 3:08pm

    This is a very bad policy and the Lib Dems should have nothing to do with it.

  • Martin Lowe 10th Oct '13 - 3:48pm

    @Louise Shaw

    I was just thinking of that article.

    The scariest thing is Osborne’s alleged quote at a Cabinet meeting: ““Hopefully we will get a little housing boom and everyone will be happy as property values go up,”

    Everything about Help To Buy is clinically insane. How on earth can anyone in their right mind support such a programme that will make things worse and not better?

  • Since I said the same thing about Gordon Brown’s bubble, I should be consistent: this is not merely bad policy, it is repugnant. Stoking a bubble, deliberately or recklessly but obviously the former is worse than the latter, is literally shovelling money from have nots to haves. Tories may be comfortable with this, Labour never understood that’s what it was doing, but liberals? We have known this for a century. Thankfully I just stopped paying the party so much money each year and am putting half of what I used to pay in subs toward ALTER.

  • Kevin White 10th Oct '13 - 4:12pm

    No wonder Danny’s so highly thought of in Tory members polls.

  • @ Louise Shaw – thanks for the excellent link which rather supports my earlier contention that this is all about politicking and not at all about doing the right thing.

    Meanwhile, two aspects of this strike me – one curious, one very serious.

    The curious aspect is that here we have a situation where the cabal of ‘economic liberals’ that runs the Party is doing something with no economic rationale whatsoever while the ‘social liberals’ are advancing very cogent economic arguments in opposition. The Westminster Village clearly remains in the grip of a school of economic thinking that has, as its principle purpose, not to find a better way but to justify the rent extraction of financiers. Have the economic liberals been played for suckers or is there some other explanation?

    The serious aspect is that it represents a complete failure of both the Party’s policy-making process and any sort of discipline thereafter. We may take pride in the ‘participative’ process and the sovereignty of Conference but it stands revealed as meaningless; fitted perhaps for a minor party of protest but utterly unfit for a party of government. I am the first to recognise that practical politics can involve difficult compromises but that isn’t the case here. This is a complete reversal of everything the party has ever stood for – at least as I ever understood it. We should be using the dictum of never letting a good crisis go to waste and using the opportunity to offer a new analysis and a new prescription based on it to force real change. Instead we are holding the coats of the establishment while they continue business as usual.

  • Actually it just proves to me that they are not as “economically liberal” as people like pejoratively to portray them. I think I’m on safe ground in saying that neither the Adam Smith Institute, the IEA nor our own Liberal Reform, have supported this one iota from the start. All have pointed out the utter insanity of stoking another bubble.

    This is pure “let’s have a policy that might show results before the election, and worry about the consequences later” politics IMO. Exactly, completely exactly, the same as Gordon Brown and Eddie George in 2001. As Eddie George said “we knew at the time this was not sustainable but that, if you like, was our message to our successors (on the MPC): sort that out!”

  • David Allen 10th Oct '13 - 6:04pm

    GF, Jock Coats, I think you are both right.

    This is not principled economic liberalism. This is unprincipled politics.

    That, I’m afraid, is what our NewCentrism is all about. It’s about not having any principles that might get in the way of doing pragmatic politics.

    That’s why the Conference agenda was all about just not being bovvered any more – about fracking, or nuclear power, or avoiding unnecessary wars in Iraq or Syria, or the principle of some sort of renewal of Trident. The old Lib Dems, who had principles about these things, might have been a more awkward coalition partner after 2015. The NewCentrist Lib Dems have no such baggage of principles that might get in the way of cutting a deal with a big party. Nor will they make waves about creating a bubble so as to win the next election.

    It is very important that everybody can see that Clegg and Alexander have not made waves about this. A good ally to have, is the message. No trouble. A much better fellow to take inside your governing coalition than that guy Farage, who would make awkward demands which would be hard to meet. All the NewCentrists are going to demand is plenty of well-paid ministerial jobs.

  • Paul In Twickenham 10th Oct '13 - 7:49pm

    @David Allen – ditto. I joined the Liberal Party in 1983 at Fresher’s Fair. The following Sunday I was delivering leaflets in a council by-election: we got hammered, I got hooked. Since then I have personally delivered at least 200,000 Focuses. I have been an activist on behalf of the Liberals and the Liberal Democrats everywhere I have lived. During the 2002 local elections a Labour candidate accused me of being a paid deliverer because he saw me about so much – thinking about the scale of my financial contributions to the party (I am considered a “high net worth donor”) I laughed so loud that he thought there was something wrong with me. At my civil partnership our “hymn” was “The Land”. I used to jokingly say that if I resigned my membership then the Lib Dems had a serious problem… And now I have left the party.

    Mr. Alexander’s support for this policy encapsulates the direction in which the current leadership is taking the party. The Liberal Democrats are to be the party of a small subset of the self-satisfied middle. The party that pays lip-service to civil liberties, equality of opportunity and economic sanity, but when push comes to shove will act “grown up” and get down into the er.. muck with the rest of them, to feather their nests and take the profit on their shiny new Royal Mail shares.

  • Surprised you were allowed “The Land” given second line 🙂

  • @ Paul In Twickenham

    So sorry to hear you’ve left a party which was such a big part of your life by the sounds of it. You’re still on this site though so I guess your still involved!

    I hear you I really do, this policy just feels wrong to me as do many other policies, but this is a coalition, we have to make compromises. Look at the return, the 10K tax threshold, the pupil premium and the free infant school meals are all fantastic Lib Dem policies that have happened this parliament, in fact they’re the ONLY Lib Dem policies actually implemented by a government EVER!

    It does suck that we have to make compromises and tow the line, but surely its worth it. All those years attending conference and delivering leaflets and you give up on the party the very moment they can actually do something? Seriously, stick with them, even when we’re compromising we’re streets ahead of any other party.

  • Robert Wootton 10th Oct '13 - 11:15pm

    As part of a coalition, we do have to make compromises. Therefore we need a landslide win for the Liberal Democrat party at the next General Election. We need a manifesto that will deliver a Strong , cohesive society based on a Fair economy.
    We need to establish a liberal society that does not beat the people with the big stick of penalties for non compliance of unfair bureaucratic rules; Big Brother. Nor waste taxpayers money on advertising campaigns exhorting people to live healthy lifestyles, i.e. stop smoking, exercise regularly. A citizens lifestyle is their own concern. All government should do is create an environment where home ownership and a healthy lifestyle is a feasible option.

    A Fair Economy would enable people to rent or buy their own home. Just increasing the money supply with the H2Buy scheme will create price inflation. Remember Milton Friedman and the Thatcher years?

  • Peter Watson 11th Oct '13 - 12:24am

    @Gareth Wilson “we have to make compromises.”
    @Robert Wootton “As part of a coalition, we do have to make compromises.”
    But does Danny Alexander sound like this is an unwelcome compromise he’s been forced to accept?
    Does Tom Brake seem reluctant to support the Lobbying Bill?
    And that’s just this week. All too often our MPs give the impression that compromise has not been necessary because they’ve got exactly what they wanted.

  • @ Peter Watson

    Agreed. If there’s one thing I wish we’d do more is clearly state when we disagree with tory policies and what we’ve done to improve them where we can. It is starting to happen now, its just a shame we didn’t do this at the start of the coalition, today’s immigration story being a perfect example of what we should be doing:


  • But Gareth, if we announced all the time where we were making compromises, it would sound like nearly all the time!
    And even if you accept what our leadership said was the motivation for LDs going into Coalition, ie to “sort the economy out” (qv Greek crisis) that would look more than a little subservient, even to those not keeping a close eye on things. Imagine how someone like me feels, who has never accepted that justification for one moment.

  • Bill le Breton 11th Oct '13 - 10:35am

    May I go back to the issue of Help to Buy? Gareth E and Prateek earlier pointed out that Conference had the chance to back an amendment that would have increased the supply of housing by giving local authorities (remember localism?) and social landlords the power to borrow against existing rental income to fund the large scale house building programme that we need.

    Help to Buy also makes a mockery of the Leadership’s argument used to reject a provision in the amendment which sought to lay down a new ‘goal’ for monetary policy. Speakers such as Malcolm Bruce and Baroness Kramer argued that this was challenging the so-called independence of the Bank of England.

    But Help to Buy IS monetary policy and it stems from Government, not the Bank of England. It is designed to break open a new monetary transmission mechanism – with is supporters claiming it is a way to get free markets working so that good borrowers can access appropriate funding.

    Those supporters believe that it will work through expectations and the wealth affect. Their argument goes that business will expect a housing boom and the attendant increase in demand (for services and products associated with house buying) and gear up immediately (i.e. invest, replenish stock, take on new staff). This gearing up becomes a self fulfilling prophecy with confidence, aggregate demand and national income increasing (even if not a single extra house were sold).

    So, if it is OK for the Coalition to IMPOSE monetary policy on us (and the Bank of England) in this way – why could Conference not advocate something similar that did not work through the housing market, but which would have had the same effect?

    As usual there was a Liberal way, but our leadership chose to support and condone the Tory way. What lack of imagination! What lack of a Liberal approach!

  • But the problem is not “merely” housing supply, but housing supply at a level of land value that makes it harder to supply (especially in respect of quality), and public sector led house building is still subsidy. There is no need for artificially stimulating either.

    If the originators of this believe that monetary policy, whether bank or politician invoked, results in a “free market” they are deluding themselves – it is always a distortion that is reckless as to who gains and who loses. Brown and George had a little margin with interest rates in 2000/2001, now they don’t, so this is the same policy all over again but a capital subsidy rather than an artificial interest rate subsidy.

    Sure, Tories who like the idea of LVT are rare as hens’ teeth (in spite of regular calls for it from people they would naturally ally with like ASI and IEA authors) but doing the exact opposite of LVT’s intention should be a red line for liberals. Relatively simple changes to planning policy could easily more or less eliminate “hope value” from “marginal locations” where new development happens whilst at the same time improve the quality and variety of housing. And only after that do we need to look at correcting for land values through taxation if that’s going to be the harder sell.

    I guess the leadership have backed themselves into a corner on this having so publicly endorsed it. But it is certainly not even an economically liberal position to take. It is solely about rent-seeking and privilege: which should be anathema to liberals of any stripe.

  • A minor point that seems to have escaped everyone’s attention (or I’m just being thick) is just what exactly is “A good home”? I ask as for some this may be a ‘castle’ and others a studio apartment in the centre of town. I ask as some seem to think that the only way to provide ‘good homes’ is to build new towns etc. which seem to imply lots of semi’s with ‘gardens’ and hence relatively low density housing where as from the way people are voting with their feet (as in London), they are wanting homes within our existing towns and cities, which would imply a different concept of a “good home”.

  • Joseph Bourke 11th Oct '13 - 5:50pm

    What exactly is “A good home”? Good question, Roland.

    This article suggests recycling all those shipping containers coming fromChina All aboard my new home!

  • There is a problem. There is a Liberal solution. But the Tories wont let us implement a Liberal solution. So we implement a Tory solution, artificially inflating already inflated land values.



  • I have never understood why everyone in this country is so obsessed with getting the millstone of a mortgage around their neck.

  • “Stronger Economy, Fairer Society”


  • Apparently Danny Alexander is prepared to write for LDV, but probably not read LDV and certainly not reply to LDV. Is there an underlying problem here?

  • Janus Greene 12th Oct '13 - 9:29pm

    He may not read LDV much, but let’s hope Mr Alexander makes some time for Martin Wolf in the FT…


  • David White 14th Oct '13 - 1:57pm

    Why on earth did Mr Alexander agree to spout OldCon’s nonsense on Gideon Osborne’s behalf? Why didn’t he tell Mr Osborne that the ConDem housing policy is rubbish (not even fit for the recycling bins) which needs to be buried deep underground, whence it cannot overly contaminate both the housing market and the entire UK economy?

    I’m sorry, dear Mr Alexander, but you should have told your Tory boss that you would not spout his drivel, but that he must do so himself.

    There is, I feel, nothing that I can add to all the comments that have identified the economic, social and housing flaws in the ConDem policy about the provision of essential homes.

    I just hope that Mr Alexander will be able to find some common sense – ASAP!

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