Salt - Escalate Collective

I don't know... I saw their site was down and wanted to reference the pamphlet, so uploaded it here.

I just wanted to bump this, because the discussion in the pamphlet about the 'one time only' nature of Thatcher's housing policies seems really relevant to why Osborne's 'help to buy' is flawed.

Iirc this pamphlet argues right to buy - the sell off of the public housing stock to boost home ownership - could only happen once. I.e. once public housing is sold off, it's gone. Most is now in the hands of buy to let landlords. That and house price to earnings ratios are now way above the long-term mean.

So 'help to buy' is an attempt to have their cake and eat it - to copy Thatcher in promoting home ownership with one eye on re-election, but without boosting housing supply and thus bursting the housing bubble. However, even allowing people to take 95% mortgages doesn't change the fact house prices are way out of step with earnings (in London, they're appreciating by £4.40 and hour, or £38,000 per year).

So insuring the banks against 15% of the mortgage (allowing them to lend more at no extra risk), doesn't do anything about the widening gap between house prices and incomes. I suspect the policy will fail - or at least, only benefit a handful of affluent middle class types who already vote Tory. On the other hand - the Labour pledge to build homes - would surely burst the housing bubble, causing widespread negative equity and devaluing bank assets (mortgages and derivatives). Bearing in mind the proximate cause of this whole crisis was a decline in mortgage values (in one sector), a general crash in house prices would seem very dangerous for the financial system, and in turn, the economy as a whole.