Meet the new boss… same as the old boss?

A new prime minister getting his or her feet under the desk and appointing a fresh cabinet is always a great opportunity to poke around and see what the mortgage industry would like to see from our new leadership in the housing domain, so that’s exactly what we did.

Fresh supply

The first place to start is surely where so many housing problems start and what is the perennial challenge of all recent governments – house building. Vantage Finance managing director Lucy Barrett says: “Many governments have tried and failed at fulfilling house building quotas over the years and I believe this is because nothing radical enough has been done.

“It’s fairly widely accepted that the planning system is not only far too slow but it is also in need of a complete overhaul. While I don’t have all the answers as to how they achieve this whilst protecting our green spaces, wildlife and of course managing the ongoing global warming crisis it needs urgent attention if there is to be any meaningful change.”

Your Mortgage Decisions director Dominik Lipnicki echoes this: “We need a real plan to build affordable homes and lots of them. Relax planning rules and prevent land banking by introducing a land bank tax. Centralise house building targets and ensure that local councils comply.

Frustration is evident when Cyborg Finance chief technology officer Adam Hosker says that, “The new government is starting with the same platitudes about overhauling planning – a repetition of promises from Johnson, May and Cameron.”

He continues: “With the gap between wages and house prices deepening, action is needed to increase supply. Inaction hurts the country, its attractiveness to foreign talent or retaining the next generation but perhaps more importantly to politicians, their electability.”

Meanwhile, Cornerstone Tax group chairman David Hannah details his wish: “The government could consider soft loans to developers to help accelerate house building programs. Fundamentally, what the government could do is to cut taxes. The corporation tax increase that was proposed by the previous chancellor and the previous prime minister looks likely not to happen.

“However, a special corporation tax rate for the next three years for developers, provided they construct housing up to an acceptable number and standard, could be provided. Liz Truss could consider a short-term cut in stamp duty, which is a real cost to developers and home buyers, or even a stamp duty holiday for developers buying sites, provided they can commence construction on them immediately.”

And Naismiths director Gareth Belsham comments: ““To start with, the new government must overcome its fear of NIMBY [not in my back yard!] voters to overhaul the planning system. The current system is a toxic blend of complexity and miles of red tape, all enforced by underfunded and understaffed local authority planning departments. The rules need to be simplified and the people overseeing the planning process need to be properly funded.

“And while building on the greenbelt will always be sensitive, brownfield development should lead the way. The permitted development rules, which allow certain planning applications to be fast-tracked, should be extended to enable more commercial buildings to be converted into homes.”

He adds: “The post-Covid shift in commuting patterns has changed demand for homes and also created a lot of vacant commercial sites, often in town centres, that could be turned into the sort of attractive and affordable homes that thousands of families are still crying out for.”

For the very first time

The woes of the first-time buyer (FTB) are nothing new to the mortgage industry. Here’s what the new government should look at, according to our interviewees.

Barrett: “Help to Buy (HTB) was a lifeline for FTBs… unfortunately it has played a part in the continued inflation of house prices, which has made the home ownership dream for some a more distant goal due to the disparity between incomes and house prices and of course the deposits therefore required.

“I think the government should continue to work with the banks to offer guarantees and encourage ways to reach a wider pool of FTBs of both new and second hand stock. Longer term, there needs to be significantly better education to young people on how to save efficiently for home ownership, and greater investment into schemes that encourage that.”

Hannah believes the HTB scheme should be extended for two years. He adds: “However, the main concern in the property market is not so much being able to afford a deposit, as much as being able to afford a monthly mortgage payment. One of the steps Truss could take to aid this is to have the banks offer a fixed rate FTBs mortgage. By fixing the interest rate for three to five years at or slightly below the base rate of 3% or 4%, it will give FTBs the predictability needed to know that they can afford their mortgage payments for the first few years.”

Hosker appears to see some hope when he reminds us that, “The new government has re-announced plans from the penultimate months of Boris Johnson’s tenure. The ability for mortgage lenders to allow rent payments to be used as part of the affordability assessment.

“A common complaint of aspiring FTBs is being told they cannot afford a mortgage despite paying higher amounts in rent for years.”

Policy wonks

And what about other parts of the mortgage industry? Buy-to-let (BTL), second homes, foreign ownership and the various taxes that must be navigated are huge areas that the government will surely look to intervene in somehow.

Here, Lipnicki says: “BTL landlords have already had a hard time over the last few years and their increased costs have often meant higher rents. We do, however, need more stability for tenants and long-term tenancy agreements should become the norm.”

And Hosker says: “The new government’s predecessor issued a ‘Fairer Renting White Paper’, abolishing no-fault evictions, increasing standards, capping rent rises, launching a landlord’s ombudsman and enabling tenants to have pets.

“There has been little from Truss regarding this, but she emphasised deregulation. Perhaps some of the white paper proposals could be watered down.”

Barrett has a lot to say on this issue: “Where do I start! the constant efforts to create financial burden on landlords to stem the market are grossly unfair. Many landlords are businesses and there are not many sectors where it would be considered fair game to penalise people in the way the tax changes have landlords.

“That said, we have seen most dust themselves off and evolve. This topic requires greater thought and analysis, and while my gut feeling says there needs to be some rethinking of the stamp duty rules, I suspect this is one to be temporarily left alone while we deal with the energy crisis and the runaway inflationary environment we are in.

“The market needs time to settle and only after a period of observation under the new government and its efforts to control these issues should further changes be made according to what the market needs at the time. Stimulation of house sales has certainly not been a requirement in recent times, but we shall see what’s around the corner.”

High energy

Finally, (with these questions following the pathway from house building onwards), we asked what the industry would like to see from Whitehall regarding energy efficiency. Hannah: “To meet the government’s commitment to reach ‘net zero’, all planning restrictions should be removed in relation to green renovations on homes, whether new or existing and including listed buildings.

“Also, there should be a value-added tax zero rating for energy efficiency initiatives, so that the country can move towards its carbon emissions target whilst at the same time stimulating the building industry at a time of national uncertainty and looming recession.”

Barrett says: “We are behind the curve in domestic energy efficiency and while grants are not always feasible, there needs to be a much closer focus on changes that become mandatory for properties to change hands or be occupied.

“By enforcing certain mandatory changes for energy performance certificate ratings at the lower end, which are not overly costly, at the expense of the owner/vendor, this would presumably have a collective impact even if individually it does not create a huge step forward. It’s important not to underestimate the impact of small change, too.”

Lipnicki gives a nice conclusion overall when he says: “There should be a real investment here which, if done well, would not only reduce inflation but help stimulate the economy.

“The government must treat housing as a critical issue and ensure that we have a housing minister with real power to make a difference – and one who stays in his position for years, not months.

“Housing should be debated on all sides of the house and a cross-party policy for the long-term should be agreed.”

We shall see!