Help to Buy will inflate another housing bubble

One major part of the scheme, hurriedly brought forward by three months in an attempt to counter Labour’s populist announcements, is potentially toxic.

The Conservative Party has spent the past fortnight accusing Labour of reviving 1970s-style socialism in the form of policies such as a temporary freeze in energy prices. The irony is that it has done so while undertaking the largest-ever state intervention in the housing market. With the introduction of its Help to Buy scheme, the government that arrived in office committed to rebalancing the economy away from its reliance on property and private debt has adopted a policy that will encourage the reverse.

The first part of the scheme, which came into effect in April, is a justified intervention. By allowing buyers to borrow 20 per cent of the value of a new-build home worth up to £600,000, the government is seeking to incentivise housebuilding, which last year stood at its lowest level since the 1920s. After six months, it has had some success. In September, construction activity grew at its fastest rate since November 2003, helping to stimulate growth and employment.

It is the second part of the scheme, hurriedly brought forward by three months in an attempt to counter Labour’s populist announcements, that is potentially toxic. George Osborne, ostensibly a fiscal conservative, has issued £12bn of state guarantees for up to £130bn of mortgage lending. The offer applies to all properties, whether new-build or not, and will allow buyers to purchase homes worth up to £600,000 provided they make a deposit of at least 5 per cent.

In an attempt to emulate the success of Margaret Thatcher, whose Right to Buy council house scheme increased the Tories’ electoral fortunes among low- and middle-income groups, David Cameron has presented the intervention as one aimed at supporting first-time buyers. He declared during the Conservative conference: “As Prime Minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed.”

Yet the early signs are that Help to Buy will do less to aid would-be buyers than Mr Cameron suggests. Those banks participating in the scheme are offering interest rates around 5 per cent, above the level that many can afford when average earnings are still 1.7 points below inflation. As such, the policy risks acting primarily as a subsidy for existing homeowners seeking to trade up or to borrow against the value of their property. Mr Osborne’s decision to set the cap for aid at £600,000, when the average house price is £172,000, is evidence that he is more concerned with creating a pre-election feel-good factor among Tory-leaning owners than he is with aiding firsttime buyers.

Even as it allows some to make it on to the ladder, the scheme risks blocking the route for others by further widening the gulf between prices and earnings.

David Cameron meets two first time buyers as the Government launches the Help to Buy scheme. Image: Getty

This article first appeared in the 11 October 2013 issue of the New Statesman, Iran vs Israel

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The economics of outrage: Why you haven't seen the end of Katie Hopkins

Her distasteful tweet may have cost her a job at LBC, but this isn't the last we've seen of Britain's biggest troll. 

Another atrocity, other surge of grief and fear, and there like clockwork was the UK’s biggest troll. Hours after the explosion at the Manchester Arena that killed 22 mostly young and female concert goers, Katie Hopkins weighed in with a very on-brand tweet calling for a “final solution” to the complex issue of terrorism.

She quickly deleted it, replacing the offending phrase with the words “true solution”, but did not tone down the essentially fascist message. Few thought it had been an innocent mistake on the part of someone unaware of the historical connotations of those two words.  And no matter how many urged their fellow web users not to give Hopkins the attention she craved, it still sparked angry tweets, condemnatory news articles and even reports to the police.

Hopkins has lost her presenting job at LBC radio, but she is yet to lose her column at Mail Online, and it’s quite likely she won’t.

Mail Online and its print counterpart The Daily Mail have regularly shown they are prepared to go down the deliberately divisive path Hopkins was signposting. But even if the site's managing editor Martin Clarke was secretly a liberal sandal-wearer, there are also very good economic reasons for Mail Online to stick with her. The extreme and outrageous is great at gaining attention, and attention is what makes money for Mail Online.

It is ironic that Hopkins’s career was initially helped by TV’s attempts to provide balance. Producers could rely on her to provide a counterweight to even the most committed and rational bleeding-heart liberal.

As Patrick Smith, a former media specialist who is currently a senior reporter at BuzzFeed News points out: “It’s very difficult for producers who are legally bound to be balanced, they will sometimes literally have lawyers in the room.”

“That in a way is why some people who are skirting very close or beyond the bounds of taste and decency get on air.”

But while TV may have made Hopkins, it is online where her extreme views perform best.  As digital publishers have learned, the best way to get the shares, clicks and page views that make them money is to provoke an emotional response. And there are few things as good at provoking an emotional response as extreme and outrageous political views.

And in many ways it doesn’t matter whether that response is negative or positive. Those who complain about what Hopkins says are also the ones who draw attention to it – many will read what she writes in order to know exactly why they should hate her.

Of course using outrageous views as a sales tactic is not confined to the web – The Daily Mail prints columns by Sarah Vine for a reason - but the risks of pushing the boundaries of taste and decency are greater in a linear, analogue world. Cancelling a newspaper subscription or changing radio station is a simpler and often longer-lasting act than pledging to never click on a tempting link on Twitter or Facebook. LBC may have had far more to lose from sticking with Hopkins than Mail Online does, and much less to gain. Someone prepared to say what Hopkins says will not be out of work for long. 

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