MAKING A DRAMA OUT OF THE HOUSING CRISIS
September 18, 2008 7:00 AM
In North Devon Journal
In North Devon Journal
The new figures from Halifax, showing that North Devon has the least affordable housing anywhere in the country, demonstrate how vulnerable we are locally to a serious recession.
Nationally house prices have soared in recent years, with my colleague Dr Vincent Cable MP a lone voice warning that this boom has been fuelled by irresponsible lending.
Locally the problem is compounded by the lowest incomes in the country, but some of the most desirable housing. This attracts people from outside the area - pricing locals out of the market.
What should we expect of government in this situation? In America huge public money has just been spent nationalising the two huge mortgage institutions Fannie Mae and Freddie Mac. So what should Britain do?
Our priority must also be to revive mortgage lending. Recent falls in house prices might have restored a little sanity into the system. But the danger is that a dried up mortgage market and continued house price tumbling could move beyond sensible readjustment in prices and into a serious recession.
Some state underpinning of the mortgage market may be a necessary temporary measure. This need not involve nationalising more lenders. We have already seen Northern Rock go, but perhaps that could have been avoided if government and regulators had responded to warning signs earlier. But it would entail some form of Treasury guarantees.
America has been the hothouse of free-market economics. Since the heyday of Thatcher in Britain and Friedman in America politicians have been curiously reticent about economic intervention. I too respect the dynamism of markets, having worked in the City before entering Parliament.
But just as a competitive sports match needs a set of rules, and a referee on hand to apply them, so too markets need regulating, correcting and redirecting. Government cannot sit this crisis out on the sidelines, either out of philosophical conviction or cowardly dithering.
Tinkering with stamp duty just won't do. They must use their legal and financial muscle to revive the money markets, and if needs be to control banks' profits in the meantime. They should also kick start a serious house-building programme as Gordon Brown promised a year ago.
None of these measures need last forever. But if they don't act decisively now there is a real danger - to quote the insurance advert - of making a drama out of a crisis.
And it will be householders, and young families yet to get houses in areas like North Devon, with incomes far lower even than Halifax seems to realise, who will pay the personal price for their failure.
What would you like to do next?
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