Friday, Aug 29, 2008
Gordon Brown is set to usher in a new era of council housing
Times: Property crash opens door to the new council house
Gordon Brown is set to usher in a new era of council housing by helping local authorities to buy repossessed and unsold properties. Cash and powers will be made available so that town halls can intervene in the housing market, The Times has learnt. The measures which could be announced as soon as Tuesday will encourage councils and housing associations to offer struggling borrowers financial help in return for a stake in their homes or outright ownership. The number of council homes has plummeted since 1981 from 6.1 million to 2.5 million. Hundreds of millions of pounds of extra cash earmarked for social housing could now be released early to buy up newly built properties.
Posted by jack c @ 08:48 AM (1467 views) Add Comment
39 Comments
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1. musn't grumble said...
Ha ha! Your new executive home is going to be in a council housing estate!
2. Still-waiting said...
Are you not aware that all new developments have a significant proportion of affordable (ie council) housing on them? Normally 30 or 40 percent. This has been the case for years.
3. waitingfor hpc said...
yawn yawn - all talk and trousers - where are they going to get this money. I see all the companies are leaving due to high taxation already!
4. waitingfor hpc said...
i meant no trousers!
5. mytimeisnigh said...
Thank god I didn't buy a new build!!! (In fact thank god I didn't buy a property full stop). Just imagine the dismay that will be felt by home owners on new build estates with large numbers of unsold properties. Their capital investment is nose diving, mortgage payments and the cost of living are increasing, their job looks shaky and their brand new, executive, four bedroomed detached with en suite is about to become one of a minority of bought houses on a council estate. How nice for these new age council tenants, compared to those forced to rent from the private sector (money grabbing buy to let landlords) in substandard terraced housing with damp walls and downstairs bathrooms.
6. handle_it said...
Unsold & repossessed ! So does the bank get all that's due ? The tenant is probably never pay back what's owed whatever. What % will the construction company be paid ? Current or retrospective valuation ? Sounds like the tax payer is going to get shafted here..
7. tyrellcorporation said...
Waitingfor HPC. I'm afraid to say the money will come from more taxation and more borrowing. As the UKs financial health sinks into the sunset where Sterling goes from here is a no brainer.
Questions:
1/ How do the banks feels about the State moving in and 'owning' part of the banks assets (housing stock)?
2/ Are Town Halls going to have the time/money/inclination to get involved in the housing market?
3/ Won't lower house prices will negate the need for more council housing?
8. Hermitage said...
I hope Buffoon Brown realises that the treasury won't be receiving any stamp duty (well, I assume that's the case) from these purchases via the council. Furthermore, will the council now have to take on more employees to litigate and service these properties? I can see council tax escalating way and above the cost of living indices.
9. Pundit said...
There might be more to this plan than meets the eye gerrymandering perhaps?
Is this the reverse of Westminster Councils sell off of council housing to Tory voters?
Its unlikely any Conservative controlled council will implement this plan it will be the Labour controlled local authorities in margin seats, eager to infiltrate middle-class housing developments with Labour voting tenants.
10. renting2 said...
tyrell@6 - a few days ago the local councils couldn't wait to get into the housing market via the mortgage route. Also, the banks will ensure they now quickly repossess and sell on anything worth repossessing before the chance of councils getting their fingers in.
Result - poss quick rise in repossessions, with taxpayers left holding the dregs that are left.
11. tyrellcorporation said...
"a few days ago the local councils couldn't wait to get into the housing market via the mortgage route" But why? I don't really see the appeal, haven't they got farmers markets to run and diversity festivals to organise?
12. tyrellcorporation said...
Are all these hair-brained schemes being repeated in countries like Spain?
13. drewster said...
waitingfor / tc,
I'm not sure where the money can come from either. Tax receipts this year and next are likely to be well down on previous years, and public sector net borrowing is already very high.
Let's do the math. The CML has estimated 45,000 repossessions this year. Assuming half of those can be 'saved' by councils, that would be 22,500 houses with a UK average value of about £175k. So it would cost the government 3,937,500,000 - nearly £4bn - to buy up half the repossessed houses this year alone. For 2009, assuming present trends continue, we can expect at least another £4bn bill.
I wonder where they might get £4bn from....
14. tyrellcorporation said...
Sorry to do 3 in a row but at least they use the words 'property crash' in the headline - possibly a first for the Times.
15. Chilli said...
give it ten years and they will be giving the council houses away to their tenants for a pound....
16. tyrellcorporation said...
There are already rumblings that the Government are about to completely abandon the Golden Rule (not to borrow more the 40% of GDP). They are now thinking about allowing a spike up to 50% of GDP during down-turns!
17. Sneaker said...
Brilliant, now the Government is the "dumb money of last resort"
18. Madashell said...
More proof that this government is simply lacking any intelligence. I'm in favour of social housing, in fact I'd abolish right-to-buy because it's just been a way of giving away a valuable public asset. Valuable because social housing is necessary in a system where many people are paid abysmal wages. Similarly we have a system where we support around 4.5 million people who are, to put it politely, economically inactive and in receipt of benefits. Unless we want to see a crime explosion and families living on the streets, we have to provide housing.
Just how much is the government intending is paid for these houses? As a council house they are worth far less than a private dwelling. The market is in freefall and we don't know where it will settle. Will the banks be willing to write off the difference? Or will the government just saddle us with more debt to underwrite the unsustainable lifestyles of a large number of pretentious fools?
I'd propose that the government just take a strong line with banks.
Ban repossessions.
Ban penalty charges.
Set a sensible interest rate.
Non-essential assets should be sequestrated, especially cars, second homes, BTL, children's assets originating from the parent.
Establish for each defaulting borrower an affordable repayment schedule, include 'whole house' income and review regularly.
Repayment s not covered are to be accrued and repaid via wage deduction over the lifetime of the borrower and family.
Force the bank and the borrower to shoulder the debt for however long it takes including from their estate.
The borrower and direct family and cohabitees should be managed in a similar way to bankrupts
These steps should be done quickly without the usual government incompetence. Anyone trying to cheat or re-assign their assets etc should be subject to summary sequestration.
The object would be to ensure the rest of us don't bail-out these greedy idiots and that the irresponsible lender and borrower have no escape from their actions.
19. justwatching said...
It's a shame that the accountability for these two or three fookwits won't be until a GE. By then we might all be broke.
Anyway. If Gordoooon buys a few repo's, what effect does it have on the markeet? I'm hoping very little as this cash (my hard earned taxes) will not be further invested in the housing market. Are the banks going to upsize to a bigger pad? Me thinks not.
At least Tony used his own (well the banks) money to buy a few pads.
20. icarus said...
If the councils bought these properties they'd have to improve the management of them compared with how councils and housing associations have managed social housing. Of the almost 5 million social housing households it's been estimated that anywhere between 3% and 10% are rented by conmen, many with several such properties, who pay rent of £80-£100 a week and then let them out for £200 - £400 a week.
21. titaniccaptain said...
There is alot of room for exploitation of this idea..................everyone who will be trying to offload their property to the local council to cut their monthly mortgage bills in half to rent the same house for alot less........then buy it back at a discount in a few years........................then wait for the next bubble and sell and the cycle goes on..............
22. Pundit said...
Throughout the UK there are vast numbers of boarded up council houses these should be refurbished before local authorities increase their housing stock with unsold new build and repossessed properties.
23. icarus said...
titanicc - re exploitation - and would the councils have incentives to scupper any exploitation? Regarding the sub-letting I mentioned @14, the councils/associations are are meeting their rent collection targets on those properties.
24. titaniccaptain said...
@icarus
Yeah the strain this would put on councils who are stretched at the monent would be beyond belief.............and how would the taxing of this manifest? would it be council tax increases??????? if not why should someone from a poor area pay for the privatisation of a 500 thousand pound house in a good area when they live in a flat above a shop in a ghetto???????? BAD BAD BAD BAD IDEA GORDON
25. nooneo said...
Titanic captain
Are you suggesting Gordon 'no more boom and bust' Broon hasn't got his finger on the pulse of the economy!!! lol.
26. Soundman74 said...
Surely the councils will wait until house prices have hit rock bottom before they purchase all these unsold new houses? I mean that would make sense wouldn't it?
Furthermore - wouldn't it be more cost effective for Governement to refurbish some of the near 1 million houses that lay empty across the country as reported a couple of weeks ago http://www.housepricecrash.co.uk/newsblog/2008/08/blog-brilliant-programme-thousands-of-empty-houses-exposed-16429.php many of which the local authorities already own!!!
27. Cr4shw4tcher said...
This really is a terrible idea. Could just be lip service to passify the imperiled voters though.
Just like selling gold at its lowest price, he now wants to spend money on housing at its highest ever price ?
Why not let the prices fall and return to a sustainable market.
28. Donald said...
I think this is a great idea. Repossessions are no good for anyone concerned. Destroys families and leaves people in debt for years and years.
5 billion a year (or whatever it is) to fund this scheme is peanuts compared the 600 billion a year the government already spends.
The housing market will still correct to historic fair value, but may not now overshoot fair value on the way down as banks will no longer desperately need to auction 10s of thousands properties at 40p to the pound (or less).
29. Soundman74 said...
So local councils buy up these new properties and rent them out to tenants thus reducing demand for private rental properties and reduce the amount of first time buyers on low incomes looking to buy thus reducing the overall demand for houses. So how does any of this 'invigorate the mortgage market'?
30. soundman74 said...
So local councils buy up these new properties and rent them out to tenants thus reducing demand for private rental properties and reduce the amount of first time buyers on low incomes looking to buy thus reducing the overall demand for houses. So how does any of this 'invigorate the mortgage market'?
31. Titaniccaptain said...
@Nooneo
I have the financial backround of a duck smoking a cigar in a universe where the concept of money cannot exist, yet I think that I am pretty certain that GB and crew havent got a clue...........I may be wrong
32. Pundit said...
We are missing the point this idea is really about job creation. Local authorities will not have the manpower or expertise to implement this plan they will need to recruit. Who better than all the redundant mortgage advisors, solicitors, valuers, estate agents and bankers etc. What a master stroke!!!
33. plato said...
tyrell @ 6 :
"3/ Won't lower house prices negate the need for more council housing?"
Exactly, but we cannot have genuinely affordable housing. This does not tie in with modern politics and banking. Debt is paramount!
34. Waitingfor Hpc said...
just more hot air from labour - watch them mess this up if they try it (like everything else they do), and I still say with all that is going on debt is probably over 50% in real terms already. There is no room for more tax, and tax returns are shrinking FAST!!!
35. techieman said...
icarus - sorry everyone else - off topic i have responded to yours of yesterday - didnt see it till today. http://efsl.wordpress.com/2008/06/04/richard-dennis-turtle-traders-system/
is the site and the link is: the first line down in blue "turtle trader system rules (the worlds most successfull trade system ever).pdf". As for the writer - Curtis Faith gives his reasons for giving it away for free on the pages itself. I will tell you that each of the turtles were "given" a trading amount of $1m. It was abit like the bet in Trading Places -there was an experiment to see if people could be taught to trade or if they needed to have some criteria. Dennis thought the former his mate thought the latter. In any case Curtis faith made $20m for hinself i think and retired from trading. http://www.youtube.com/watch?v=C3pGf_yuyBA [he then went on to lose the money on something else!].
http://www.traderslog.com/curtis-faith.htm
36. a saver said...
yeah, why don't the government jump in and buy some properties with taxpayers money while they're still way overpriced?
All the more houses for Romanian gypsy single mothers...
They would be best doing nothing and letting prices fall, after which they could jump in and pick up some bargains (now that would be REAL prudence), but they want to look like they're on the man in the street's side.
37. Refusetobuy said...
Actually, they have already done this. Who owns the morgage book of Northern Rock?
A few more banks failing will replenish the council housing stock.
38. nooneo said...
Titaniccaptain @ 31 said...
"I have the financial backround of a duck smoking a cigar in a universe where the concept of money cannot exist" - I never thought anyone would reference Howard the Duck on this site, brilliant.
I still have my No1 Howard the Duck for the early seventies - You must have a few grey hairs like me TC. I'm still chuckling
39. titaniccaptain said...
My grey hairs fell out along time ago........im so old that I have to live in a plant pot and be watered. yeah good film