The lower end of the housing market has always been the most important in terms of general activity – it is the ‘engine room’ of the residential market. The lack of first time buyers is one (not the only one) of the major problems for developers at the moment and is partly to blame for the lack of new development. If first time buyers become active it starts the whole residential chain up again as people ‘upsize’.
So the government has come up with an idea to try to increase activity at the bottom of the housing food chain. It’s idea? that social housing tenants should be offered discounts of up to £75,000 to increase the numbers exercising the “right to buy” their home in England. The maximum discounts currently range between £16,000 to £38,000.
The hope is that this will persuade more tenants and mortgage lenders to get involved in the scheme first started in the 1980s which has been dormant for years. But in my view this approach is fatally flawed; If people buy their affordable housing (previously council housing) the available stock reduces. We saw this in the 1980′s when this scheme was started under Margaret Thatcher. At that time again it was said that sold off housing would be replaced – it wasn’t, and the private rented sector partially filled the gap, consequently we stall have a lack of affordable housing.
The government insists all social homes that are sold;
“will be replaced on a one-for-one basis by a new affordable rent property, ensuring there is no reduction in the number of affordable homes”.
By whom? And who is paying?
The private developers will not fill this gap unless it makes them a profit, and affordable housing is actually more costly to build than a similar ‘private’ dwelling. Also affordable housing produces the ‘nimby’ effect almost as much a wind farms in the UK, so finding and getting planning on sites is also a major problem.
As usual a poorly thought out plan, the current housing shortage is set to continue with this approach.