Thursday, Oct 08, 2009

"local authority taking a creative approach to meet housing needs"

FT: Birmingham to boost locals' home deposits

Birmingham City Council is considering a scheme to assist residents with deposits to help them obtain mortgages from high street lenders.Simon Houltby, spokesman for Birmingham City Council, said a residential "mortgage intervention" scheme was also being considered. Rather than competing with high street banks, the scheme would be aimed at helping local residents access mainstream lenders, he said. Mr Houltby said: "There has always been an intention to see what we can do to help people buy homes. What we identified is while the high street is lending again, they are requiring big deposits. "We have looked at not so much lending the mortgage but lending part of the deposit to people. That is the model we are looking at but it is in early stages."

Posted by jack c @ 10:59 AM (1201 views)
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1. mark wadsworth said...

Hurray! Another reckless throw of the dice! Use council taxpayers' money to pay other people to pay higher deposits (thus pushing up the price) on houses that are now bearing a higher council tax (or worse services) which pushes down the price!

We have reached a post-modern tax/economic system where the only thing that matters is house prices! Housing will no longer be taxed, it will be subsidised! Hurray! Nobody needs to work any more, we all just need to own houses, and the mugs that work will pay for everything for us!

Thursday, October 8, 2009 11:09AM Report Comment

2. dave_the_dog said...

The madness continues . . . astounding!

Thursday, October 8, 2009 11:14AM Report Comment

3. Leicestersq said...

The whole point of a deposit is that it is capital actually owned by the person taking out the loan. That puts them on the line for the first chunk of any losses, increasing their incentive to work hard and repay, and also to ensure that they buy a good asset really worth the cost, and of course, reduce the total amount that has to be repaid.

All of these are good things. So this council are now going to waste council tax payers money, ensuring that the effect of all these good things dont happen. Oh, and it will force up house prices as well as now more people can bid more money in the market place for the same housing stock. Shocking.

Thursday, October 8, 2009 11:27AM Report Comment

4. icarus said...

"Excessive leverage caused house prices to reach these levels, so we need excessive leverage to keep them there", the spokesman added.

Thursday, October 8, 2009 11:28AM Report Comment

5. jack c said...

The Birmingham Council move is not isolated - the scheme below (whilst not on a like for like basis) has just gone live this month and is being widely advertised within the local community (radio etc..)



PLANS to re-introduce mortgages funded through Sunderland City Council are being discussed next week.

The mortgages could be offered from October helping support people denied loans by mainstream lenders and targeted towards housing schemes in the city.

Borrowers would need a minimum 10 per cent deposit to be considered for a loan limited to three times household income. Loans would be capped at £200,000.


Thursday, October 8, 2009 11:31AM Report Comment

6. mark wadsworth said...

"Loans would be capped at £200,000".

More madness. Seeing as the council can create planning permission for zero up front cash cost, why doesn't it just allow more houses to be built, and cap the loan at 75% of the construction costs (i.e. 75% x £80,000 = £60,000) of the new houses? That way they can lend to three times as many households with much, much better security.

Thursday, October 8, 2009 11:33AM Report Comment

7. wiltshire said...

This is scandalous. The best service this council could provide the residents with would be education as to why borrowing huge sums to spend on property at a time like this is at very best risky and potentially financially fatal.

Thursday, October 8, 2009 11:42AM Report Comment

8. jack c said...

mark wadsworth - in the wider scheme of things this is probably limited intervention, however it does tie in with and reinforce the point you made the other day regarding underestimating the lengths the Government will go to in propping up the market.

Thursday, October 8, 2009 11:45AM Report Comment

9. inbreda said...

the only good thing about schemes like this is that they will have to be paid for (plus interest and administration) by the very people that are meant to be benefiting. When the unavoidable tax rises come, the crash will happen. And it will happen much, much much worse than if they had left well alone.

Has anyone considered that the government is not so much trying to prop up house prices as the only economic consideration of voters, but to give a long enough window for them to bail out. At a time when most (dim witted) BTLers and homeowners are sitting tight waiting for the market to pick up (to stupid 2007 levels again) the politicians are probably quietly flogging off the last of their 2nd, 3rd and 4th homes in the mini boom, before the inevtiable bust - knowing they will be able to pick up from where they left off at half the price - all on the back of taxpayer money.

Thursday, October 8, 2009 11:51AM Report Comment

10. This comment has been removed as it was found to be in breach of our Blog Policies.


11. icarus said...

mw @5 - please explain. Is there much land that could be used for residential purposes that currently doesn't have permission and which councils own or could acquire for nothing up front?

Thursday, October 8, 2009 12:19PM Report Comment

12. eyeoftheweasel said...

Inbreda, I think your theory might have some substance. It'd be interesting to know how many Birmingham and Sunderland councillors are also BTL landlords, and I think Birmingham and Sunderland council tax payers also have a right to know.

Thursday, October 8, 2009 12:49PM Report Comment

13. str 2007 said...

Incredible that the people in charge of granting further planning permissions (perhaps with a 'owner occupier' clause attached) could help people get on the ladder at no expense to the local tax payer, instead choose to fan the flames further.

I think any memebers of this council putting forward these plans should have to put forward their own personal property interests. If any are involved with BTL then I think grounds for a fraud investigation could be brought forward.

Thursday, October 8, 2009 12:52PM Report Comment

14. mark wadsworth said...

@ Inbreda, it's different in different areas, of course, but remember that 80% of the UK population live in towns and suburbs, which cover less than 10% of the UK by area, so actual houses, gardens, residential streets are maybe two or three per cent of the UK by area.

Conversely, 85% of the UK by area is undeveloped - farmland, lakes, green belt, forests. You'd notice this if you fly to or from an airport in London - there is a huge great city, then there's a fence, then there's a hundred miles of pretty much nothing in every direction.

Thursday, October 8, 2009 01:13PM Report Comment

15. icarus said...

mw @12 - was that a response to my q @ 9?

Thursday, October 8, 2009 01:26PM Report Comment

16. mark wadsworth said...

Icarus @ 13, yes mine @ 12 was a response to what I yours @ 9. (I just typed 'Inbreda' not 'Icarus').

Thursday, October 8, 2009 02:17PM Report Comment

17. cyril said...

Mark councils have to abide by their own planning policies when making planning decisions so it may not be as easy as you think. Also they have to buy land off the owners using compulsory purchase powers, they can't just appropriate it. Or is Birmingham city council run by revolutionary communists?

Thursday, October 8, 2009 03:37PM Report Comment

18. mark wadsworth said...

@ Cyril, sure, they are caught in a web of NIMBYism and crony-ism, but it's the whole idea of planning law that's wrong*.

What's wrong with them auctioning off planning permission to surrounding farmers/landlowners? If your ag land is worth £5,000 per acre without Planning Permission, but worth £250,000 to £500,000 with PP, wouldn't any sensible farmer/landowner be prepared to actually pay for the PP? There's no need for any "appropriation". This idea is TM Tim Leunig (and it isn't perfect but it's not the worst idea in the world).

* By all means have some restrictions so that people don't build on playgrounds and stuff, or in flood zones, or a few narrowly defined AONB's, that's about ten per cent of the UK, not eighty per cent, that's a different topic.

Thursday, October 8, 2009 03:42PM Report Comment

19. cat and canary said...

..but where would the council(s) get the money from?? If they only chuck a few £M quid at it, then its just a PR exercise

Thursday, October 8, 2009 05:03PM Report Comment

20. drewster said...

Where will the council get the money from? Councils get 1/4 of their income from council tax and 3/4 from central government. The flow from central govt is likely to be frozen or reduced in the next budget. They're hardly exactly rolling in cash at the moment, as far as I'm aware.

Thursday, October 8, 2009 06:47PM Report Comment

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