Time to act

With the cost of borrowing and the size of deposit required rising all the time, falling prices may seem, at first glance, to make life easier for first-time buyers.

With mortgages costing more, renters may also find themselves squeezed as buy-to-let landlords are forced to put up rents to cover mortgage costs. Capital Economics suggests that rents could rise by 10 to 11 per cent during the next two years. Are we looking at a situation where buying and renting will become unaffordable?

Social housing has been the traditional answer to unaffordable housing costs. Scandalously, a Labour government has presided over the destruction of the social housing safety net. Since this government came to power the number of families waiting for social housing has risen by more than 60 per cent to 1.6 million and just last month the Local Government Association predicted that it could rise further to two million families by 2010.

If even a small proportion of these families are to be affordably housed, we will need a big increase in new social housing. At our last party conference, we proposed building 1.3 million new homes for social rent and affordable purchase during the next 10 years.

We want to free local authorities to build social housing rather than stifle them through the complex and inequitable Housing Revenue Account subsidy system, which acts as a tax on council tenants. Why should council house tenants, already vulnerable and on low incomes, bear the greatest responsibility for funding this additional investment?

Right to buy helped create mixed communities, but it has hugely reduced the social housing stock. The problem isn’t right to buy, but the fact that the capital receipts are not reinvested in more affordable housing. We would end the Treasury’s drain on right-to-buy receipts to ensure that homes sold are replaced locally.

To make matters worse the downturn in housebuilding will seriously hold back social housing. New social and affordable homes have been secured through section 106 agreements and if developments dry up so will the funds for social housing.

With the housing market as it is, it is to be expected that housebuilding rates will fall. We should be creating incentives for communities to accept development by allowing them to retain some of the profits.

More must also be done to bring empty homes back in to use. The Empty Homes Agency recently reported that the number of vacant homes has risen to more than 670,000. With so many families waiting for social housing, this is a scandal.

Unfortunately, we’re also facing the possibility of large-scale repossessions for which this government has left us unprepared. There are almost one million fewer social homes to rent than there were during the last housing market crash in 1991. With around 60,000 low income families spending 75 per cent of their take home pay on mortgage repayments, it seems that the number of repossessions could well exceed predictions.

Free financial advice for struggling homeowners is a must. Plus the government should ensure that homeowners must be offered the opportunity to renegotiate their mortgage terms and extend the length of their mortgages.

Finally, the government should look into the possibility of allowing homeowners to ‘staircase’ down into shared equity in order to avoid repossession. For some families reducing their equity, and becoming a shared owner, could be the necessary step to prevent the misery of repossession and homelessness.

Nick Clegg is leader of the Liberal Democrats and MP for Sheffield Hallam.