The UK Housing Crisis - What's The Answer?

It is acknowledged by the Government that there is a "Housing Crisis" in the UK which, if not tackled, will severely limit the economy's growth and the Government's objective to reduce the economic deficit.

The Housing Crisis is not just about the need for more general housing, housing for first time buyers or housing to rent it includes all types of tenures and in particular affordable housing for the elderly and vulnerable. The answer of course is to increase the supply of housing but the more difficult question for the Government has been how to achieve this. A combination of solutions is required to ensure more housing is built - particularly affordable housing that is suitable for the elderly and those with social needs. These solutions will involve different participants, different tenures and different financial models.

Home Ownership

Traditionally housing supply was either delivered by the housebuilders, or by Housing Associations/RSL's. It is apparent from the limited housing built to date that neither of these are providing sufficient housing, albeit they will remain part of the solution. The larger Housing Associations have separate non charitable developer subsidiaries that develop housing for sale as well as affordable to rent. Housebuilders in the current market will continue to provide houses for sale, at the right price, providing the required returns.

One of the well-publicised difficulties has been the inability of first time buyers to secure finance to enter the housing market. As we now have a Conservative Government, home ownership is at the heart of what they believe. Consequently, the Government continues to focus on providing incentives and assistance to these house purchasers. This includes the Help to Buy scheme which enables people to buy a home priced up to £600,000 with a deposit of as little as 5%. The Help to Buy scheme also includes:

(a) Help to Buy: equity loan - the government lends up to 20% of the value of a new build home, along with an extended scheme for Londoners to be loaned up to 40% the price of a newly-built home from early 2016 to 2012

(b) Help to Buy: mortgage guarantee - will run until 2016 and enables lenders to offer homebuyers 80% to 95% mortgages

(c) Help to Buy: NewBuy - aims to help buyers who have a deposit of at least 5% to buy a new-build home (working with the Home Builders Federation and the Council of Mortgage)

(d) Shared ownership: aimed at social tenants and other first-time buyers. These allow people to buy an initial share of a home and pay rent on the remainder, usually to a housing association. From April 2016, the current restrictions on who can buy a home through the scheme will be removed so that anyone who has a household income of less than £80,000 outside London or £90,000 inside London can buy...