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These are pathetic gestures which will do little to shift the housing market one way or the other. With the average home costing a little under £200,000, £200 million will buy only 1,000 properties — compared with the 167,000 built last year, many of which remain unsold. As with Gordon Brown’s sale of gold reserves at the bottom of the market in 1999, all he will achieve is to make a spectacularly badly timed punt with a bundle of taxpayers’ money.
But more to the point, why is the government trying to buck the housing market at all? Leave it alone and prices will continue their slide. Then, perhaps in a couple of years’ time, first-time buyers will be able to afford to buy themselves entire houses, rather than the half-houses which Gordon is offering them now.
I suspect most first-time buyers will be able to work this out for themselves. The government’s previous attempts to encourage social-housing tenants into shared-equity schemes have not proved a huge success. In 2005, it introduced the ‘Social Homebuy’ scheme designed to entice tenants to buy a stake in their homes. By last November only 88 had chosen to do so. There are good reasons why the take-up is low. Under shared-equity schemes, tenants are invited to buy a share in their home of typically between 30 and 70 per cent. The remaining share they continue to rent from their housing association, or in a few cases the local authority. However, they are obliged to stump up 100 per cent of the maintenance costs for the property.
Not only that, selling a share in a shared-equity home is not a straightforward business. You can’t simply place your shared-equity home on the market through an estate agent. Most schemes oblige a vendor to give the housing association the right to sell your share to another of its customers, at a price set by a valuer recommended by the housing association. Only if the housing association fails, usually within eight weeks, to find a customer willing to buy your share may you offer it on the open market.
In a falling market, the prospects for selling shared-equity properties are not good. Shared-equity housing made its first appearance during the 1980s boom, but rapidly fell out of popularity when prices fell and first-time buyers could afford to buy homes outright: long after the market began to recover from its early-Nineties slump, estate agents’ windows still carried dog-eared photographs of shared-equity properties which they could not sell.
The one thing which Gordon Brown’s scheme will achieve is to annoy people who have recently bought new homes. Imagine you’ve just paid quarter of a million for a house on what you believed was going to be a cul-de-sac full of owner-occupiers. How are you going to react when Gordon buys the property next door and moves in a social-housing tenant?
Housebuilders reacted to last week’s initiative not by saying ‘thank you’, but by demanding the government spend even more millions buying up unsold new homes. It isn’t hard to understand why the housebuilders should be so anxious: Barratt last week warned it may have to lay off 5,000 staff due to a collapse in sales. But filling privately built homes with social-housing tenants will ultimately undermine the market, as private estates are transformed into council estates. If I were a housebuilder I would sooner slash my prices than accept Gordon Brown’s shilling.
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