Boris Johnson today laid out a bold plan to turn ‘benefits into bricks’ by allowing low-paid workers to use handout income for mortgages.
In the wake of the Tory confidence vote meltdown, the PM used a major speech in Lancashire to vow to revive Margaret Thatcher’s housing revolution for low-income families.
He announced moves to extend the ‘Right to Buy’, which helped millions purchase their council properties at huge discounts in the 1980s and 1990s, to housing association tenants.
Arguing that £30billion in housing benefit is going on rent rather than home ownership for three million people, he said he wanted Universal Credit to be counted as income when families apply for a mortgage.
The existing Help to Buy ISA could be adapted so those savings are disregarded from calculations, although it is unclear exactly how that would work.
Meanwhile, a government review will look at the wider mortgage market aiming to increase access to 95 per cent loans for properties.
However, critics complained that the ideas are not ‘thought through’, and people on benefits will struggle to put together deposits.
There is also no new funding attached to the Right-to-Buy extension, with only pilot projects mooted at the moment. Ministers have refused to say how many people would actually be able to take advantage of the schemes, which give discounts of up to 70 per cent depending how long people have lived in properties.
Mr Johnson also conceded that the government will not necessarily hit its manifesto target of building 300,000 new homes a year by 2025. ‘I can’t give you a cast-iron guarantee we are going to get to a number in a particular year,’ he said.
The package seems squarely aimed at the Red Wall which delivered Mr Johnson’s huge 2019 majority. He is heavily dependent on the support of MPs from those areas for his survival, after seeing off a coup attempt earlier this week.
Mr Johnson pointed out that housing benefit is forecast to rise to £50billion by 2050 without action.
That money was being ‘swallowed’ to pay the mortgages of private-sector landlords or by housing associations, he said.
‘It’s time to put his huge wall of money – taxpayers’ money – to better use. It’s time to turn benefits to bricks,’ he said.
‘We are going to look to change the rules on welfare so that the 1.5million working people who are in receipt of housing benefits – I stress working people – and who want to buy their first home will be given a new choice: to spend their benefit on rent, as now, or put it towards a first-ever mortgage.’
In other developments today as the PM attempts to get back on track:
- The average price of a litre of petrol at UK forecourts reached a record 182.3p on Wednesday, according to data firm Experian Catalist. It means the average cost of filling a typical 55-litre family car is £100.27;
- There are claims that Mr Johnson and Chancellor Rishi Sunak have ruled out cuts to personal taxes this Autumn, despite calls from Tory MPs and the OECD;
- Tory Eurosceptics are said to have been brought in to help draft legislation scrapping the Northern Ireland protocol, which could be published as early as next week.
In the wake of the Tory confidence vote meltdown, Boris Johnson used a major speech in Lancashire to vow to revive Margaret Thatcher’s housing revolution for low-income families
Mr Johnson (pictured observing a bricklaying lesson in Blackpool) announced moves to extend the ‘Right to Buy’, which helped millions purchase their council properties at huge discounts in the 1980s and 1990s, to housing association tenants
In a major speech in Lancashire later, Boris Johnson will unveil new proposals to boost home ownership
The PM (right) will try to revive Margaret Thatcher’s housing revolution today with a new package to help low-income families buy their own homes. But Michael Gove (left) admitted there is no new funding and refused to say how many people would be able to use the scheme
What is Boris proposing on housing… and will it make any difference?
Renewing a pledge made by David Cameron, Boris Johnson announced a push to extend the Thatcherite scheme, which helped millions purchase their council properties at huge discounts in the 1980s and 1990s.
Housing association tenants could be able to take advantage of prices 70 per cent lower than market value, depending how long they have lived in the property.
However, Michel Gove admitted there is no new funding attached, with only pilot projects mooted at the moment.
He refused to say how many people would be eligible, merely insisting it will be more than 1,000.
Another property will need to be added to housing association stocks for every home sold.
Benefits for mortgages
Plans are being drawn up to help families on Universal Credit get on the property ladder.
Benefits could be counted as income when applying for a mortgage.
Mr Johnson is arguing that the £30billion in housing benefit that currently goes towards rent could help people secure and pay for mortgages.
Critics have pointed out that UC is only available to families with less than £16,000 in investments and savings.
But the government is looking at disregarding Help to Buy ISAs from the benefits limit.
Mortgage market review
A government review is looking at how low-deposit mortgages could be extended.
Downing Street says the assessment will consider how to improve access to loans, learning lessons ‘around the world’.
It will be launched in the coming weeks and report back in the Autumn.
Encouraging a wave of modular or ‘flatpack’ homes to be built is another new measure being actively considered.
However, the potential incentives have not been spelled out, and the PM might not give any more details in his speech.
Furniture manufacturing giant Ikea has a housing construction arm called BoKlok which has developed 12,000 modular homes across Sweden. It is already building hundreds of properties in Britain.
The house can be assembled at a site in Bristol with cupboards, ovens and electrical sockets in place. Three houses a day can be built using the system.
Mr Johnson said discounting Lifetime ISA and Help to Buy ISA savings from Universal Credit eligibility rules would ‘make it easier for hard-working people to put away a little every month until they have enough for a deposit on their first home’.
The PM also said mortgage support for those who become unemployed will be available more quickly and the Government is looking at measures to ‘securitise’ some of the £30billion housing benefits bill in order to fund more development of homes.
Mr Johnson said the overall package would ‘not only help us to build many more homes in the right place but will help millions of people realise what is currently an unattainable dream of home ownership’.
The premier said there are 2.5million households whose homes belong to associations, saying ‘they’re trapped, they can’t buy, they don’t have the security of ownership, they can’t treat their home as their own or make the improvements that they want’.
He said that some associations have treated tenants with ‘scandalous indifference’.
‘So, it’s time for change. Over the coming months we will work with the sector to bring forward a new right-to-buy scheme,’ he said.
Mr Johnson added that it would give ‘millions’ more the chance to own their own home and would see ‘one-for-one replacement of each social housing property sold’ while being affordable within existing spending plans.
Downing Street said there will be a ‘mortgage review’ looking at how low-deposit mortgages could be extended.
The Prime Minister’s official spokesman said: ‘We want to look at access to low-deposit mortgages and what our mortgage industry can learn from others around the world.’
He said the review into ways to ‘extend low-deposit mortgages and create a greater market for them’ will start in the coming weeks and report back in the autumn.
Discussing plans to allow housing benefits to contribute towards mortgages, he said: ‘The bill for housing support is around £30billion a year and it could reach £50 billion by 2050 if we don’t take action.
‘That’s money currently going to private landlords or housing associations, so we’re looking to change the rules so rather than taxpayers’ money going to private landlords those on housing benefits can spend their benefit on rent or towards a mortgage either for full or shared ownership.’
No10 said the move to allow housing benefits to pay for mortgages would effectively discount savings into ISAs from the Universal Credit eligibility rules.
The Prime Minister’s official spokesman said: ‘This would enable people who are privately renting also to save, for people on benefits to save to get a mortgage, effectively by exploring discounting savings into lifetime or help to buy ISA from Universal Credit eligibility rules.
‘So, anyone who is able to save specifically for a deposit will be exempt from the UC taper and will be eligible for the Government top-up, which is a 25 per cent bonus to your savings up to a maximum of £1,000 a year.’
But plans to open up Right to Buy to all 2.5million housing association tenants appear to have been scaled back due to the cost, which one source warned could reach £3billion a year.
The new scheme has not been given any additional funding. Instead, Mr Gove has been asked to use existing funds at his Housing Department.
In a round of interviews, Mr Gove confirmed there will be a ‘cap’ on the number of people who can take advantage of the Government’s new housing scheme.
When asked what the limit would be, he suggested it would be more than a thousand but said: ‘That’s something I will be discussing with housing associations.’
He also refused to give a figure for how many benefits claimants might be able to use that money to get mortgages.
‘I don’t know and I can’t know… by definition that figure can only be a guesstimate,’ he told Talk TV.
Speaking on Sky News, he added: ‘We’re looking specifically at a savings vehicle that people can use in order to save for that deposit.
‘Because home ownership is not just good for individuals, it’s good for society overall.
‘We want people to have a stake in the future, we want people to be able to invest in their own home, we want people to have somewhere safe and secure, warm and decent, in which they can raise their children.’
Pressed on where the funding for the scheme will come from, he said: ‘It will come from the overall parcel, the overall envelope, of Government spending.’
Mr Gove said the Government will make sure there are new houses to replace those bought by lower-paid workers under new plans where they can use housing benefits to buy their homes and an extension of the right to buy for housing association tenants.
He told Sky News: ‘One of the things that we will be doing is making sure that there is a replacement – a like-for-like, one-for-one replacement.
‘Yesterday I introduced legislation into the House of Commons that means there will be a new levy on developers.
Right to Buy became one of the policies of Margaret Thatcher, whose statue is pictured in Grantham, with around two million families given the chance to buy their home at a discount of up to 70 per cent
‘That means that when new developments occur, when new homes are built for sale by the big housing companies, we will extract some of the money that they make and some of that money will be set aside explicitly to make sure that there is more affordable housing or council housing for people who need it.’
Mr Gove added: ‘The way in which the levy works means that people can be assured that when planning permission is granted for new developments that there will be money in due course.
‘Councils can borrow against that in order to invest.’
Shadow levelling up secretary Lisa Nandy said there were ‘real practical problems’ with the plans.
‘This speech was yet more evidence that the Prime Minister and his tired government are out of ideas.
‘You can’t solve a housing crisis with back of the envelope policies that have no realistic chance of success.
‘Every family deserves the security of their own home, but under the Conservatives housing has become more insecure and unaffordable.
‘Homeownership rates have plummeted. Nearly 200,000 socially-rented homes have been sold off. The impractical proposals announced today will do nothing to fix that.
‘We need a government that shares the enormous ambition we have for ourselves, our families, and our communities – a government that will invest, grow the economy, get money back into people’s pockets, and back its people in every part of the country.’
Today’s speech has been billed as the first step in a re-launch in the wake of Monday’s bruising confidence vote, which the Prime Minister won by a margin of 211 to 148.
He yesterday insisted that ‘nothing and no-one’ will get in his way as he tries to re-focus the Government’s efforts on public priorities after months of political infighting.
Right to Buy became one of Mrs Thatcher’s totemic policies, with around two million families given the chance to buy their home at a discount of up to 70 per cent.
How thousands of ‘flat-pack’ homes were built after Second World War
After the Luftwaffe laid waste to housing stocks in the Second World War, the government turned to temporary homes.
More than 156,000 ‘prefabs’ – flat-pack properties constructed in a factory out of a limited number of materials – were built across Britain on the orders of Winston Churchill, who had envisaged the problem even before the end of the conflict.
Sometimes mockingly referred to as ‘tin can homes’, due to many being made from steel plate, the structures were only ever meant to be a stop-gap.
Thousands were demolished within a decade and replaced with more permanent structures as access to resources improved.
But more than 70 years on around 8,000 still remain, including a row situated on Wake Green Road in the leafy Birmingham suburb of Moseley – where sprawling five bedroom houses sell for as much as £1.3million.
The 17 steel-framed prefabs have gained somewhat of a cult following by supporters who see them as ‘a testament to and symbol of post-war recovery, innovation and optimism for a brighter future’. And all but one of them is now protected with Grade-II listed status.
But half now lie empty as hollowed relics, sitting opposite semi-detached homes with two car driveways owned by high-flying professionals and in an area where houses sell for an average of £340,000. One five-bedroom property just a short walk down the road is currently on sale for more than £500,000.
Proposals for renters to be able to buy discounted housing association homes are not new, and appeared in David Cameron’s 2015 manifesto.
After that failed to materialise, Mr Johnson committed to considering new pilots for the scheme ahead of the 2019 general election. But industry experts have warned that giving tenants the right to buy is far more complex and expensive than the sale of council houses in the 1980s.
Unlike council houses, most housing association properties are financed through private sector debt, which needs to be paid off. One pilot scheme in the Midlands found it cost the taxpayer £65,390 per home sold.
Pilot schemes have also operated on the basis that a new property would be built for every one sold. While the plan could help avoid criticism of the original scheme, it also adds cost and complexity.
Tim Bannister, Rightmove’s director of property science, said: ‘If a review of the mortgage market could help with the challenge of needing such a big deposit then it would be greatly welcomed by those who are able to demonstrate that they can afford monthly payments, but who are currently locked out of homeownership.
‘It’s clear to see why there are many renters keen to get on the ladder, as they’re forking out 40% more each month than 10 years ago, while low interest rates means average mortgage payments have only increased by 11% over that same time.’
Alicia Walker, head of policy, research and campaigns at Centrepoint, said: ‘If the Government is truly serious about turning ‘benefits into bricks’ then we need to see a serious level of investment into genuinely affordable social-rented housing.
‘We support measures to improve homeownership, particularly for young people as rates have declined drastically over the last three decades. However it’s not clear how much this will really support people in housing need.
‘As well as this, extending the Right to Buy to housing associations risks further eroding the stock of social housing, which many young people desperately need. Promises of like-for-like replacements have been made before but not been followed through.’
Charles Roe, director of mortgages at trade association UK Finance, said: ‘The mortgage industry recognises the importance of home-ownership and today’s announcements by the Prime Minister could help more people realise their dream of owning their own home.
‘Firms are committed to lending responsibly, with regulatory rules in place to ensure that mortgages are affordable – it will be important to carefully consider any changes to ensure they deliver good outcomes for customers throughout the life of the mortgage.
‘We look forward to discussing the proposals and will continue working closely with the Government to help more people get on to the housing ladder.’
An extension of the Right to Buy for housing association tenants is also expected.
Polly Neate, chief executive of Shelter, said: ‘The Prime Minister’s housing plans are baffling, unworkable, and a dangerous gimmick.
‘Hatching reckless plans to extend Right to Buy will put our rapidly shrinking supply of social homes at even greater risk.
‘For decades the promise to replace every social home sold off through Right to Buy has flopped. If these plans progress, we will remain stuck in the same destructive cycle of selling off and knocking down thousands more social homes than get built each year.
‘The maths doesn’t add up: why try to sell off what little truly affordable housing is left – at great expense – when homelessness is rising and over a million households are stuck on the waiting list?
‘The Government needs to stop wasting time on the failed policies of the past and start building more of the secure social homes this country actually needs.’
James Andrews, a personal finance expert at Money.co.uk, said: ‘Boris Johnson is unashamedly dipping into Margaret Thatcher’s ‘greatest hits’ catalogue to shore up backbench support following this week’s damaging no-confidence vote.’
Right to Buy: Flagship Thatcher policy that has seen more than 2.5million council homes sold off
Right to Buy, introduced by the Thatcher government in 1980, led to more than 2.5million council homes being sold at discounted rates.
Although some Labour-controlled councils were opposed, the Tories argued the scheme was necessary for increasing home ownership and rewarding aspiration.
The sale price of a council house was based on its market valuation, discounted initially by between 33% and 50% (up to 70% for council flats), which was said to reflect the rents paid by tenants and also to encourage take-up.
The maximum discount was raised to 60% in 1984 and 70% in 1986, but by 1988, the average discount that had by then actually been given was 44%.
Some 6,000,000 people were affected, with around one in three actually buying their property.
Michael Heseltine, then the housing minister, declared that ‘no single piece of legislation has enabled the transfer of so much capital wealth from the state to the people’.
Justifying the policy, he said: ‘There is in this country a deeply ingrained desire for home ownership. The Government believe that this spirit should be fostered.
‘It reflects the wishes of the people, ensures the wide spread of wealth through society, encourages a personal desire to improve and modernise one’s own home, enables parents to accrue wealth for their children and stimulates the attitudes of independence and self-reliance that are the bedrock of a free society.’
However, many on the Left have savaged the programme, blaming it for slashing the national stock of council-owned properties and lengthening waiting lists.
When Labour returned to power at the 1997 general election, it reduced the discount available to tenants in local authorities which had severe pressure on their housing stock, including almost the whole of London.
However, Tony Blair’s government never actually attempted to abolish Right to Buy – perhaps wary of the huge backlash that could result.