Six (count 'em) families now benefitting from Labour's mortage rescue scheme

by Stephen Tall on July 1, 2009

There was a fair amount of mockery of the Government a couple of months ago when it was revealed that Labour’s flagship Mortgage Rescue Scheme, launched last autumn, had helped only one family up to the end of April.^

I said then that these things take time, Rome wasn’t built in a day etc. How prophetic, for today we discover that the figure of families helped by the Mortgage Rescue Scheme has rocketed … to six. Or 6 if you prefer. To be fair, that’s a 600% increase. On the debit side, the original intention was to help 6,000 families facing repossession.

Here’s what Our Vince had to say about it:

Helping just six families is absolutely pitiful and doesn’t even begin to address the scale of the problem. Vast reams of red tape stand in the way of families faced with repossession staying in their own homes. There are enormous time lags and the vast majority of people who think they are eligible find that they are not.

“Repossession is a ticking time bomb. Despite the predictions of a modest fall, the numbers of repossessions are likely to soar in the next two years because of rising unemployment. Temporary Government schemes are deferring the problem, not solving it. If interest rates start to rise next year, the problem will become even more severe.”

Vince was today leading a debate in Westminster Hall on this very issue of mortgage arrears and repossessions – you can read the Hansard transcript HERE. Here’s his conslusion:

Repossession is only really a problem because of the underlying lack of available housing, particularly social housing. If social housing was freely available, repossession would not be the tragedy and disaster it currently is. Are the Government, working with the charitable bodies, doing any research at the moment on what happens to people who become repossessed? I do not think that any of us know where those people actually go, although anecdotal evidence suggests that most of them go into the private rented sector, which of course presents problems of its own. Many people go into the private rented sector because they can then get housing benefit, which they found more difficult to get as owner-occupiers, but many of them are still in considerable difficulty.

There is still an issue about how to ensure greater availability of affordable housing in the long term. Yesterday, the Prime Minister, in his statement, gave an indication that more money will be brought forward, stitched together from various other departmental budgets, to increase the availability of social housing. That is welcome, as far as it goes. I understand that the Housing Minister is due to make a statement this week indicating that councils will have greater flexibility in their housing revenue accounts, to enable them to build more council houses of a traditional kind. Will the Minister confirm that that is correct? Will we have a statement about it and will the Government move on the issue?

Another development is taking place on which it would be useful to hear the Minister’s thoughts. I understand that the biggest leap forward in the housing supply is now likely to happen in the form of institutional private investors—pension funds and insurance funds—putting their money into private rented accommodation, some of which could then be managed by local authorities or other registered social landlords, with a share of property being available for social renting, much as we have had through owner-occupier developments in the past. Do the Government welcome that trend? Are they looking at the role that social landlords can play in collaborative arrangements with private developers producing private rented property? Have they thought through some of the legal implications? Is it part of Government long-term planning?

My concluding thought is that the Government have introduced some useful initiatives. They have undoubtedly alleviated the threat of repossession for probably thousands of people, but in many cases the problems are being postponed. We are building up a crisis that will probably reach maturity in a year or two. I want to use this debate primarily to persuade the Government to think ahead rather than looking back, and to consider how to deal with the problem when the crisis builds up in magnitude, as it surely will.

^ In fact, it seems the actual figure was two rather than one. I’m not sure that changes very much, though.

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The simplest way to reduce the housing shortage is to either reduce immigration or to prevent immigrants from qualifying for social housing – if they can’t house themselves they shouldn’t be here.

There are plenty of ‘buy to let’ flats on the market; rather than building new houses and concreting over even more of the country, the Govt should buy these cheaply.

by Boudicca on July 1, 2009 at 8:21 am. Reply #

“Boudicca” – recent figures suggest some 5% of social housing allocations go to people who are not UK citizens. Some of these will be long-term UK residents, however. Now, I will grant you that this is a nationwide figure and thus ignores the issue that there are pinch-points where it’s a much greater factor, particularly inner London boroughs. However, it isn’t the major issue in the lack of social housing, the major issue is that much of it has been sold off under the “right to buy”.

It has been politically impossible to speak out against the right-to-buy almost since it was introduced. To have done so was to get one denounced as some sort of doctrinaire state socialist who got a kick out of ordering people around and telling them what colour their front door should be.

It was always my opinion, however, that it was a ticking time bomb, and now as Vince Cable has noted, the fuse is very short. I did write to the Minister for Housing, Ian Gow, when it was introduced pointing this out and asking how the next generation would be housed, but his reply to me was that I should not worry my silly little head about that (or words to that effect), the housing would still be there albeit privately owned, so where was the problem?

The funny thing is that in part he was right. The housing is still there, often bought up by the tenant and sold on to buy-to-let merchants. In some cases the buy-to-let merchants colluded with the tenant from the start – for anyone who was a council tenant it made no financial sense at all to hand the keys back to the council if for whatever reason you no longer required the tenancy. Instead, simply find a buy-to-let merchant and agree to cut the difference between the market value of the property and the right-to-buy discount. These people distributed flyers round the council estates pointing this out.

In some cases, the reason the tenant no longer required the property was that he or she was dead. Now, if you had an elderly mum living in the three-bedroom council house in London where you’d been brought up as kids, quite obviously it made enormous sense to buy it for her and take the couple of hundred thousand pounds profit you could make when you sold it after she died.

Well, the right-to-buy merchant is under no requirement to let to people with local needs or connections, so, yes, filling it with recent immigrants working in the service industries made jolly good financial sense. If they were illegal, all the better, because they sure weren’t going to make a fuss if you treated them badly or threw them out if they didn’t pay the rent.

But the other thing that made jolly good financial sense was to let it to people on housing benefit. Housing benefit will pay the market rent. The market rent might be three times the cost-price the council lets out identical property it still owns. So, there we are, the right-to-buy led to our hard-earned money being taken in tax from us and passed as pure profit to the right-to-buy merchants. It also led to tenants being trapped because there was no way they could take on a job which would pay the market rent and leave some left over. There was no point in taking on a lower paid job because anything you earnt was balanced by a cut in housing benefit.

I suspect there are now many many people out of work and just hoping they will get a job in the next few months meanwhile their savings are dwindling away paying the mortgage. Repossession takes time, it has only been a year since the crunch became visible. There are going to be a lot of these in the near future, and the shock and horror of people in this situation who assume council housing is there as a safety net for those who get thrown onto the streets and find it isn’t any more because it got sold off is terrible. I saw a couple of cases of that when I was a councillor, but that was in the boom years, they were just unlucky and perhaps stupid people who’d taken a silly gamble and lost. Though aren’t we encouraged to take silly gambles by the free-market fanatics, isn’t that what they call “enterprise”? Easier if you come from a rich background, plenty to draw on if the gamble fails, and a rich mum and dad with a big house as the fallback. If you start with nothing you have nothing to fall back on if the entrepreneurial risk you took fails.

It might also be noted that we aren’t the USA where there is cheap land and trailer parks for those who gambled and lost to go to. Much free-market fanaticism comes from wannabe Americans who haven’t taken on board the extent to which USA culture works on there being vastly more land than we have.

So, there you go, did these things need to be spelt out? They ought to have been obvious to anyone able to do a little thinking and with some contact with the margins of society.

The mortgage is a financial instrument more suited for those times when most people could assume they had a job for life. Having it as the main means for getting housed alongside removing the council housing safety net is likely now to lead to fearsome consequences. It has been impossible to say this for 25 years or so because the smart set wouldn’t listen. But now we’re almost there – the housing crunch which long ago hit the voiceless may shortly hit those who assumed Thatcher’s Britain had life all sorted out for them.

No doubt in saying this I shall be accused of wanting to return to the time when we had a three day week and dead bodies lay about the streets unburied.

by Matthew Huntbach on July 1, 2009 at 9:38 am. Reply #

It has been politically impossible to speak out against the right-to-buy almost since it was introduced.
Even some Conservatives at the time objected to the way it was implemented – for instance, that proceeds could not be applied to creating new council housing, even where it was sorely needed.

by Frank H Little on July 1, 2009 at 12:15 pm. Reply #

“To be fair, that’s a 600% increase.”

No it’s not, it’s a 500% increase. It increased by 5. If something increased from 1 to 2, that would be a 100% increase.

by Alex on July 1, 2009 at 7:58 pm. Reply #

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