The Help to Buy Scam…

Nora Connolly 

Image © IWM

The second part of the government’s mortgage scam, sorry scheme, has been launched. The Help To Buy Scheme aptly illustrates that where there`s a scheme there is usually a schemer. The first phase encouraged homeowners to purchase new builds, around 9,000 properties involved thus far. The second phase is more significant as it makes available £12bn in guarantees to lenders – enough, it believes, to support £130bn of mortgages with the buyer paying a deposit as low as 5%. Ministers have claimed the scheme could guarantee up to 190,000 mortgages a year over three years. The second stage of this proposal includes older properties but excludes the purchasing of a second home and prohibits the buying of property with a view to rent. Participation apparently involves credit checks with “stress testing” factoring in variables such as future adjustments in interest rates. The ultimate “stress test” is of course the loss of a borrower’s job, leading to possible repossession. This potential disaster is addressed up to a point; the government will cover a chunk of the lender`s losses, as 15% of the deposit is provided. Thus socialising the lenders loss and risk while providing no safeguards for the borrower, who face homelessness if they default on the loan. So, it seems where necessary, intervention is possible even when it usurps the great misnomer of our time, the free market (as long as the intervention is designed to protect capital – this great plan sounds familiar). The housing Minister questioned yesterday on the world at one, maladroitly side-stepped the issue of his new found zeal for intervention.  

House prices it seems must not be allowed to fall. The government justifies intervention believing it will help those frozen out of the housing market. By increasing access they also hope to push up the overall housing supply. Critics suggest the scheme is mad and will generate a housing bubble. Indeed, what is needed is a more genuine and coordinated interventionist approach, especially as it appears that we are actually only building half the homes we need in the UK. A spokesperson from The Institute of Directors yesterday damned the proposal arguing amongst other things that we need to increase the housing supply. The Guardian on the same day carried some perceptive comments. One asked, was it right that taxpayers subsides large corporate house builders?  The same commentator pointing out that this measure was simply encouraging people to buy homes at inflated prices they can ill afford.

Is it too fanciful to suggest that government intervention should focus on building high specification social housing for rent. The cultural aversion to council housing is an interesting social phenomenon. The snobbery and hostility toward council estates recently highlighted in last week’s Moral Maze broadcast. Listening to such comments it`s difficult to believe there was ever anything positive about council housing. But there was especially before the concept was undermined by central government. Of course the stigma associated with council housing runs deep and began in the 1980s when Mrs Thatcher introduced the Right to Buy Scheme. As Eric Evans points out 204,000 council houses were sold in 1982/83 and sadly this was a hugely popular, though short term measure, which is having a profound long term impact. The undermining of social housing was accompanied by the steady erosion of tenant’s rights both in private and public housing, a situation that has brought us to the ultimate erosion of tenant’s rights  in the form of the Bedroom Tax. Interesting to compare the level of tenant`s rights in the UK with that of Germany, a nation who also happened to avoid the economic crash. Of course a UK housing policy that took social housing seriously would also undermine the housing bubble one of the unannounced reasons that social housing is so ridiculed in this country.  

The government point out that the Help to Buy Scheme is only one policy in a raft of measures to help house people. But it is difficult to take this view seriously. This week the Disability Charity Scope highlighted that an increasing number of disabled people in the UK are forced to use high interest door step lenders to help make ends meet. This was reported on BBC radio 4 who focussed on the story of disabled women, Susan Donnelly who has been forced to use door step loan companies with extortionate repayment rates. This is because she is a victim of the Welfare cuts and has been required to find an extra £20+ per week because of the Bedroom Tax. As the spokesperson from Scope pointed out the situation is so desperate for many disabled people in the UK that they are unable to exercise caution and forced into the clutches of loan sharks. If council tenants are finding it difficult to pay their rents then obviously they are at risk of losing their homes.

The Help to Buy Scheme is indeed insane. In the midst of an austerity programme billions of pounds are found to maintain a housing bubble. Money made available to protect banks and other lenders, insuring them against any losses. Such organisations granted an added incentive to encourage reckless borrowing. Thus inducing people to purchase homes that are beyond their means, an extreme case of caveat emptor. In contrast the most vulnerable section of the UK poor, the disabled, find they are subjected to a stringent cap on benefits. Lest we forget, this austerity programme was inspired by the economic collapse brought about by casino banking originating in the City of London but ultimately paid for by the council tenants of the UK. This is a cruel paradox, an unconscionable situation but the house rules in the UK are set by a Tory led coalition. And in this casino the dice are loaded very much in the favour of the rich. We are not of course all in this together, the poor are paying for the reckless games played by the super rich. This  undermines UK society because a house divided is a house defeated.

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