Presentation on theme: "CIC Economic and Policy Forum Housing Policy – the current situation and future directions Peter Williams, Director, CCHPR, Cambridge."— Presentation transcript:
CIC Economic and Policy Forum Housing Policy – the current situation and future directions Peter Williams, Director, CCHPR, Cambridge
My Presentation Follow on from Allan Evident that the housing market is not in a good shape – question what happens now? The Current Context A New World? FTB Prospects Housing policy Conclusions
The Current Context Complex, fast changing and very uncertain Markets are nervous and capital is being hoarded – the improvement in credit conditions has been halted Demographics shifting –more older households, fewer younger households -impacting upon HO Home ownership falling since early 2000s – mortgaged owners down and HO % is down OEF project fall to 64%, down from 73% - but regional splits?
The Current Context Politics and economics; –Political pressures growing – party of home ownership though…. –Economic pressures for growth and housing a good multiplier – not just FTBs –Problems elsewhere in market -2 nd time freeze –Turnover down at 50% –FTBs or BtL?
A New World? From £360 bn gross and £110bn net in 2007 to ? What is new normal? In volume and LTV terms Steady return but more costly, tighter access? Asset growth constrained by regulatory changes, low interest rates, enforcement actions, banking reform
FTB prospects Little wonder home ownership remains a strong aspiration albeit fluctuating and weaker amongst younger age groups Numbers of FTBs down by 50%, average age increasing and parental assistance key –distributionally significant Access has weakened and past evidence re cohort catch up? As noted new funding and regulatory environment tighter – access more expensive/restricted – distributional consequences What then can be done?
FTB prospects Limited response from government and likely to remain so though will up political game Core concern in the market given the importance of FTBs to overall turnover/activity but ….? Some product innovation; – Lend a Hand and variants plus Offset and Savings pledges – Co-Ownership – Mill Group – Partnership mortgages and HOUSSAs –Castle Trust – Aldermore with Hitachi unsecured – Mates mortgages?
FTB prospects Current work on risk to lenders via builder cover and return to MIG cover for higher LTV New focus on information and advice Modest return to higher LTV lending but unlikely to see return to pre 2008 for say 15 years? LCHO lending returned to a degree but viewed as higher risk and no solution yet re CRD Temporary or permanent gap in asset accumulation
Going forward Baby boomers have assets – asset rich and possibly income poor, children might be income rich but asset poor Is the HO boom key to tackling the fall of home ownership? Clearly questions as to how much of this asset base will be available given pensions/health/aspirations etc? Plus unrealistic expectations of younger generations? New models of rent to own, role of leasehold But should we be doing this –risks to vulnerable borrowers? Price edging down outside of London But concentration risk, volatility and government aspiration for greater price stability
Housing policy A complex set of issues! (see Savills latest Residential Property Focus) Housing policy review to be published on 26 th October –led by Cabinet Office/No10 Recognise the problems re supply/FTBs and Qs re planning impacts Taken a number of steps re regional targets/structures and on Homebuy Direct/FirstBuy, NHB, NPPF, HB/Welfare reform, social housing reform including affordable rents Elements but a strategy? What are the gaps? Clearly a concern with stability, supply and FTBs but no money Tensions across govt – BoE, FSA, CLG, HMT, DWP Any government initiatives will probably not be sufficient unless a wider strategy Ever less efficient use of stock – again a tax agenda? Better use of existing LCHO stock and more RSL/LA activity Lender/Builder on high LTV and use of MIG Market more like 1970s with gtees/LA/HA mortgages etc to support bottom of market Appetite for long run solutions?
Housing (and Planning) Policy NHB 6 years council tax for new devt/brought back into use plus bonus for affordable –worth say 10k – how used? Top sliced from settlement so if not active – lose out NPPF consultation –presumption in favour of sustainable development (not defined)- due 2012? Simplified – good but might be driven by case law/appeals/inspectors – SOS only on bigger sites Reliance on districts – neighbourhood plans optional and cant overide – possibly time consuming/expensive/public inquiry paid for by PC CIL introduced on a discretionary basis (2 Las to date) and overrides Section 106 – CIL for infrastructure, 106 for on site options – less 106? Unknown impacts but clearly planning applics down!
Conclusions Housing market and housing policy in play –unknown outcomes Pressures are building - backlog plus new demand Search for funds –for development/finance for builders/HA/LA/Landlords/Homebuyers and focus on assets/incentives/market Growth review key to this and housing’s place in it – a quick and direct multiplier – signals housing will win? The Market rather than the State The risks of a slow recovery/fast recovery Given rates, economy, confidence, events hard to see much changing quickly No real political appetite or capacity in government and market is where it is!