Cicero Policy Briefer

Issue 4, September 2006

Cameron unveils plans for first time buyers

By James Allen

David Cameron will head towards his first Conservative Party conference as leader armed with a raft of ‘new’ policy announcements made during the summer recess. At a recent Cicero Consulting summit on housing policy in Westminster*, Cameron, joined by his rising star Shadow Housing Minister Michael Gove MP, delivered a keynote address which echoed Thatcher’s ‘Right to Buy’ speech, calling on the Conservative Party Public Services Policy Group to look at proposals where rent payments can be converted into mortgage payments for council tenants.

Cameron is attempting to formulate policy to close the widening gap in the housing market between “the dream of owning a flat or home” and the reality that to be a first time buyer is becoming more difficult than ever. This is a laudable aim, but the challenge for Cameron’s Tories will be to create policies that deliver sustainable, timely and low cost solutions for home buyers. In the last five years, the average cost of a home for a first time buyer has more than doubled, and as salaries have not increased by anywhere near this much, the gap between what first time buyers can afford, and the reality has widened dramatically.

The Labour Party quickly dismissed Cameron’s proposals as “recycling a failed Tory policy”, pointing out that only 400 people took up the “rent for mortgage” scheme in the 13 years after being introduced by John Major in 1993. Labour claims that its own HomeBuy scheme is already helping first time buyers on to the property ladder and that the Government is committed to building more homes in market and social housing, with particular regard for key workers. The Liberal Democrats joined in the criticism of Tory proposals, with Housing Spokesman Dan Rogerson MP stating that an extension of “right to buy” legislation would simply diminish social housing stock and not tackle the core issue of the lack of affordable homes in the UK.

Aside from the obvious political wrangling over the issue, it is clear that there are major problems in the house buying process, such as uncertainty throughout the sales process, problems with surveys and valuations, and failure at the mortgage approval stage. Given the uphill struggle that first time buyers face, policy innovation in this area is most welcome. The Government has been defeated on the central tenet of Home Information Packs (HIPs), but the laudable aim of attempting to correct market failures and to make the house buying process more efficient, more transparent and more affordable must not be lost.

Another challenge for all the main parties in addressing the first time buyer issue will be to balance the need for more housing stock with environmental concerns, and the concerns of the existing local community that substantial levels of new build development would bring. Stakeholders in the debate will be looking to all three parties over the conference season, the next parliamentary session and beyond to offer innovative and possibly non-partisan solutions to the problems in the housing market.

*Full list of speakers at the event: Rt Hon David Cameron MP, Michael Gove MP, Iain Anderson (Cicero Consulting), Professor David Miles (FSA and Morgan Stanley), Andrew Barnett (Joseph Rowntree Foundation), Rachel Court (Yorkshire Building Society), Murdo McHardy (Scottish Widows Bank), Ray Boulger (John Charcol) and Nicholas Boles (Policy Exchange). Many innovative product and policy ideas were discussed at the event, and full slides of presentations are available by email on request from james.allen@cicero-europe.com.

James Allen can be contacted on +44 (0)20 7665 9535 or click here to email.