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Boris Johnson was almost summarily evicted from Downing Street. Now, safe in his own home, he’s looking for somewhere to show ordinary people (and especially his own MPs) that he’s with them in what appears to be an attempt to improve his gruesome post-Partygate polls.
Measures to increase home ownership are known to improve the Conservative Party’s electoral chances. Small wonder, then, that Johnson is trying to shake off the psychodrama of a no-confidence vote with two big ideas: first, extending the right to buy to 2.5 million housing cooperative tenants, and second, allowing workers who receive benefits to use those benefits to pay mortgages, so they can buy their own homes by, as he put it in a speech in Blackpool, “turning services into bricks”.
But there are flies in the ointment that should mend Johnson’s fortune. Since the 1980s, Right to Buy has contributed to a shortage of public housing, and more than a million people are now waiting for public housing. Wales has put an end to the scheme for this reason – because it is the housing crisis’s equivalent of trying to fill a bathtub with the plug unplugged if the social housing that has been sold is not replaced.
The housing market today looks very different than it did in the 1980s. Extending the right to purchase is a very costly way to transfer wealth to a small number of social tenants at the expense of social housing supply.
Reactionary and short-term, this idea harks back to the heyday of the Conservative Thatcher party in an unsuspecting attempt to emulate its electoral success. Far from addressing today’s social housing shortage, it risks exacerbating it. David Cameron also gave the Expanding Right to Buy a crack. A state assessment of its pilot project found it difficult to replace the lost public housing on a similar basis.
Johnson may not be worried about losing his home for now, but the fact that he is willing to invoke Tory god Thatcher to appease his party at the expense of people in dire need of public housing is pure hubris.
In theory, his other idea is slightly better. You could even call it a radical attempt to democratize access to mortgage lending. Why should workers who receive housing benefit for rent be excluded from home ownership and condemned to the precariousness of private renting? Why should public money subsidize landlord investments instead of mortgages for low-income earners?
In reality, the announcement is not very detailed.
How Johnson plans to persuade banks to lend to people on welfare remains to be seen. If anything, with rising inflation, mortgage brokers say banks are becoming more cautious about who they lend and who they don’t.
Darren Baxter of the Joseph Rowntree Foundation (JRF) narrates I: “These proposals are not very detailed and raise questions about their feasibility. We need to see answers to questions about the significant mortgage market reforms, deposit support and universal credit rules that would be required for this proposal to work.”
Johnson said today he wants a “steady stream of 95 percent mortgages.” He’s said this before, and unless you’re using Help to Buy, most banks still have a maximum loan-to-value ratio of 90 percent. This means that prospective buyers need a deposit of 10 percent. According to the Office for National Statistics (ONS), the average house price in the UK is now £278,000. So buyers will need a deposit of £27,800 before they even think about legal fees and other costs.
There is also a regional problem here. With Local Housing Allowance capped at the lowest third of market rents in any given area, those in London (where the average house price is now £523,000) and the South East will find it much harder to buy than those who live in areas where rents and property prices are lower.
Finally, if the government wants to help working people claiming housing benefits to buy a home, how does it intend to help private renters? What about people who bought homes under fractional ownership schemes? And what help is there for the 11 percent of homeowners (2.4 million households) who, according to JRF, have incomes so low they would be eligible for housing benefits if they rented their homes?
Currently, homeowners who take out mortgage payment assistance are required to pay it back to the DWP with interest when their homes are sold. Johnson repeatedly used today’s speech to let the country know economic turmoil was ahead. “We’re sailing against the wind,” he said. That is certainly the case, which is why today’s announcements look like a half-baked political maneuver rather than a comprehensive package of support for those who need it most.
Vicky Spratt is a residential correspondent at i
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