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The Reason Why - Housing Crisis Solution Part 1The Reason Why - Housing Crisis Solution Stage 1SUMMARY: To permanently resolve the Housing Shortage we need a multi-faceted approach, but first we must identify why we have a Housing Crisis, otherwise we will compound the problem and another crisis of a different type will develop. For instance, perhaps there will be negative equity recession coupled with fewer non skilled jobs available due to A.I. (Artificial Intelligence), resulting in mass unemployment with high population and no means to resolve it; or a water shortage due to global warming after millions of homes are built in the second most densely populated nation after Japan, i.e. Britain. If we do not acknowledge and anticipate these and other potential scenarios we will be negligent to the British society and the “green land” we have inherited. We must not therefore build en masse yet. My first policy proposal is only a beginning to resolve the Housing shortage and addresses the main problem that even “key workers” (nurses, teachers etc) are hindered from purchasing even one home due to “buy to let” mortgages, which allowed a “few” to monopolise the ever decreasing “first time buyer” homes and have “captured” 5 million properties in the process. Introduction“In 2014, two million private landlords owned and let five million properties in the UK (Paragon)” “Private landlords have put home ownership beyond the reach of at least 2 million families, research shows. The radical report from the new Conservative think tank?Onward recommends ending or severely curtailing tax breaks for buy-to-let and private landlords”1___________________________________________________________________1 (accessed 8th September 2018)Due to recent legislation “buy to let” purchases have reduced but we must decisively abolish “buy to let” altogether. Property prices will then naturally come down as competition for property purchase in the “first time buyer” range will reduce due to less competition from “buy to let” investors. Property prices are not then hyper inflated due to a few individuals buying more than their fair share of “first time buyer” homes that would normally be easily available to the whole population. Rental prices may also come down as there will be less demand as more people will own their own home.We do not want the property market to crash, and it is still possible to access 100% Mortgages albeit at a higher interest rate. I have seen these offered 2.75% and higher2. If “buy to let” is abolished it is essential this is coupled with more mortgage products with 100% loans to include shared ownership properties. These mortgage products may increase in availability by free market forces anyway, as a result of abolishing “buy to let”. I will address the aspect of building of new homes later in this essay, but we need to establish the urgent need to release these 2 to 5 million properties back into the property market for first time buyers. There is a need also for “priority to purchase” for those who have either been born in the UK, or have been in the UK for at least 20 years, (with the exception of those in key worker jobs, nurses, doctors etc) or those earning ?30’000 plus for 5 years or more, or others that are significantly contributing to the UK although not born here. In effect, those not fitting into these categories can rent only. If we do not do this, excessive non skilled immigration is already creating the same supply and demand problem that “buy to let” has done and we need to address this. Many EU nationals also now own “buy to let” properties, further compounding the increased demand on property.______________________2)%C2%A0%C2%A0 (accessed 10th September 2018)The Natural Cause and EffectThe UK and Europe are not the only nations suffering problems of Housing shortage, spiralling property prices in New Zealand have identified the problem as laws too liberal that have allowed too much foreign investment. The UK also has this problem and it is an extension of the internal problem of “buy to let” Landlords buying a second home in Cornwall or similar. “New Zealand has banned foreigners from buying homes as part of new efforts to curb skyrocketing housing prices. The government argued the ban would lower the cost of homes, but critics said the new policy risked stifling the economy and would not fix the problem. House prices have soared in New Zealand in recent years, with average costs rising more than 60 per cent nationwide in the last decade and almost doubling in Auckland, the country’s largest city3. If we decisively end “buy to let” Mortgages, this will, coupled with interest rates now beginning to rise, cause many “buy to let” Landlords to begin selling off their homes for fear of not covering their mortgage payments. As employment levels are high, there will still be buyers for these properties, which hopefully will come down in price as more are released onto the market and supply increases with less investor demand. It will be a necessary “controlled property market depression”.“When landlords come to refinancing they will have to fulfil the PRA (Prudential Regulation Authority) criteria of a minimum stress rate, which could leave them as ‘mortgage prisoners’ and unable to refinance away from their current lender," he said. He said landlords will no longer be able to use 'pay rate' - the initial rate offered before the deal ends – and the 5.5% stress test could stop them from refinancing”4This strategy will gradually release the 2 to 5 million homes currently rented on “buy to let” and allow many more people to buy without a deposit.____________________3 (accessed 7th September 2018)4 (accessed 7th September 2018)Essential New Rules For Selling “Buy To Let” HomesHowever, there should be legislation that “buy to let” homes must only be sold individually and not as a “block” to investors, be it 2 properties or 1000. The couple mentioned below had 1000 “first time buyer” homes, these are now forever lost to the British buying public to overseas investors. With so many properties being held by one landlord in one area (Ashford, Maidstone, Folkestone) it may result in the rental market in these areas being “cornered”. This gives local people less choice if the rents are held high in these properties by one Landlord. “Britain's biggest - and most notorious - buy-to-let landlords have struck an agreement to sell their entire property empire (900 properties) for ?250million to Arab investors8 The couple have already made around ?25million by selling around 100 of their homes to Chinese and Indian investors, and hope to be rid of all the houses by the end of next year. Prior to announcing the couple's intention to sell the properties, Mr Wilson faced criticism after saying he preferred to let his properties to Eastern European migrants as they were less likely to default on rent payments than Britons on benefits”.5Unfair Advantage For “Buy To Let” Investors.It is very seldom (if at all) that “first time buyers” are offered “interest only” mortgages, this is due to stricter rules on lending since the 2008 crash. However, with a “buy to let” applicant, as long as they have ?25’000 salary (even though they may have other properties) they are almost always offered “interest only” mortgages, this means a much lower monthly mortgage repayment. “Most buy-to-let loans are interest only, not repayment. In other words, you pay only the interest each month and clear the capital debt when the property is sold. There are several advantages to an interest-only loan if you are buying a property to let. Interest-only monthly payments are cheaper than a repayment mortgage – ?360 on ______________________5 (accessed 8th September 2018) average, less than half of what you’d pay for a first-time buyer’s residential mortgage of ?770 each month. That’s according to MoneySuperMarket data for the 2016/17 financial year”.5Recent legislation has made “buy to let” more expensive, for instance Stamp Duty has gone up and tax relief on mortgage repayments is being phased out, however, the “buy to let” investor still has the upper hand. Rebalancing Support For First Time Buyers With 100% Mortgages LoansIt is already possible to obtain mortgages that provide 100% loans for 2.75% upwards. Key workers on a ?30’000 salary could obtain a mortgage x 4 of this, this being ?120’000. In the cheaper areas of the UK like Eastbourne, Wales or the Midlands, this may still buy a small property outright. If more 100% Mortgages were available including for “shared ownership” properties, this will increase the ability of “first time buyer” professionals and others to buy, who have employment stability but do not have a deposit. Offering more 100% mortgages will buffer the property market and prevent it from collapsing when we remove the availability of “buy to let” mortgages and their properties also go up for sale. Higher interest rates anticipated will also cause the “buy to let” homes to slowly enter the market for resale. Property prices will come down to a degree (which we want), but increased mortgage options to purchase a property without a deposit will increase the number of new purchasers as the “buy to let” investor gradually comes out of the market.Making It Safe.I realise that much of the 2008 financial collapse occurred due to mismanagement of Mortgage Lending to those who were not in stable work or unskilled, and some were given 125% mortgages without financial checks. I am not suggesting a return to this irresponsibility. We could maintain the current financial checks for affordability, but at the same time allow more flexible options for 100% mortgages for those who can show a history of 2 years of steady income, even if self employed or in non skilled work, plus professionals, Teachers, Nurses etc. They should be counselled before taking a Mortgage, on the safety and benefits of purchasing long term, rather than as a short term investment. This, plus additional safeguards shown below ________________________________________5(accessed 7th September 2018)with regard to 100% mortgages should also be added/created in law to prevent a financial crisis related to the property market. Purchasers should be warned verbally and in writing that if negative equity occurs in the short term (after their purchase) then they may not be able to sell and move easily. However, no one can commit fully to their future due to the unexpected incidents in life, so these 100% mortgages should also allow the “letting” option of their property in case they are unable to sell due to negative equity and they need to move urgently. But property owners will not be able to purchase another property via a mortgage until the first property is sold, they will therefore have to rent. It should also be a rule that they have at least 6 months of bank statements showing they have the equivalent of 1 mortgage payment as a float in their account each month after their living expenses have been deducted. There should be a new rigid procedure which the buyer should be given in written form should default on mortgage payments occur, as follows: Should they have financial difficulty, then the process for repossession will begin after one missed mortgage payment. For instance, after the first missed mortgage payment plus a further 14 days have passed with non payment, then Section 21 Notice will be issued giving 2 months’ notice to vacate and the property put on the market. If a second mortgage payment is missed. It will remain a “no fault” eviction as long as the mortgagor (the owner/occupant) allows access for viewing and complies in every way. If they do not, this will affect their ability to obtain another mortgage or rental home in future and they will face additional mortgage costs. If the Mortgagor can pay their missed payments in full at any point and the property is not already sold (exchange of contract stage) and the Mortgage company is agreeable, then the Section 21 Notice will lapse. If the Mortgagor has not resolved their financial problems by the time the Section 21 vacation date is reached (by this time 3 months unpaid) then Court proceedings can begin if the Mortgagor has not already vacated. A fast track system is already in place but improvement by new laws should be passed so that the Mortgage company has guaranteed automatic occupancy of the property after 4 months. They may already have sold and mortgaged it to another purchaser during this time. It must be a new automatic eviction that can be supported by the Police, not the High Court bailiffs, so reducing costs and time. The Mortgager can also vacate earlier than requested. There must be zero tolerance for mortgagors claims as the mortgage company and banks are taking the risk (and the public who save with them), not the Purchaser who has paid no deposit. If flexibility is allowed, the nation’s financial stability is at risk, which is of greater importance than one family, important though that is. If they are informed in advance of the system then a mortgagor can take financial precautions before accepting the Mortgage.Mortgage companies already do their own valuation and survey, so purchasing of overpriced properties will be avoided by this practice, it will also bring the property prices down as Surveyors may undervalue properties in order to decrease risk. “Buy to let” sellers may well already have equity in their property unless recently purchased. But in response to accusations of unfairness and loss of equity by ex “buy to let” owners, it could be said they have been unfairly assisted in the past due to “interest only” mortgages being available to them but not to first time buyers, and these new rules are a means or redressing this. The Dilemma/Danger Of Mass Immigration & Consequent Housing NeedsThe findings of Migration Watch in 2011 showed the following: “The period of high net migration from 2002 coincided with an increase of over 60 per cent in the waiting list for social housing….To provide social housing for migrant households we are likely to need around 415,000 additional social homes over the next 25 years – equivalent to over 16,000 a year or 45 additional homes every day. Based on current data, the cost to the taxpayer of providing these additional social homes will be around ?25 billion, or one billion pounds a year”.6____________________________________6 (accessed 9th September 2018)Before we start building homes en masse we need to control the immigration and who it is that has access to Social/Council and privately purchased homes in Britain. We should also consider that many EU and other non UK nationals in Social/Council and Private homes in Britain also have a property “back home”. The UK Social housing system and its laws for access, even for private housing, were not designed for free movement of 500’000 people with the same rights as the British for rental and purchase. The EU membership in this context is an onerous contract to the UK for it damages the “fairness” of the system to the British born (of any ethnic group). “Equality” laws can sometimes turn into injustice. New Vision For New Homes We will have to build new homes en masse at some point, and having lived and worked in Welwyn Garden City, Hertfordshire7, I suggest this “garden city” is the model we should use if we are to take up large swathes of Britain’s “green land”. It has a wood nearby, a college and green near the centre, a hospital and industrial area, social and private housing. A fountain and green areas throughout the town and attractive shops. To improve on this, it could incorporate, or be near a small functioning farm with chickens, sheep, cows, horses with riding school, kitchen garden and British butterfly, Bee and Bird breeding centres. All with access for the public and schools. Other “new towns” I found to be concrete jungles in comparison. I suggest we build similar Welwyn style “garden cities” not too far from a major city, and in the Midlands, Wales, Scotland, Exeter, away from London so as to spread the population and work opportunities more evenly across Britain, so that all of Britain thrives. The Councils could also refurbish the older cheaper properties in these more distant areas for Social Housing use. But this is for Housing Solution Stages 2/3/4.But before we build en masse, we have to put in place measures in advance to resolve our Housing crisis and our laws on immigration and access to property, both Private and Social homes. If we do not, to resolve the Housing and Homelessness crisis will be an impossible task. It will also be unfair to the British born (of any ethnic group) for as fast as we build more homes, more will be needed, and land is not limitless.______________________7 (accessed 10th September 2018)Conclusion:In the 90’s when properties were difficult to sell there was a need for “buy to let”, but it has been allowed to continue for too long and has severely damaged the property market in Britain. We need to rebalance the market along the lines I suggest, but it is only Stage 1 of resolving the Housing crisis/shortage.What the economist John Maynard Keynes saw ahead for us in his lifetime (1883 -1944) was “barring such catastrophes as uncontrollable flood of population or a totally destructive war, was not a continuation of the current state of misery and doubt, but a prospect so fair as to be almost unbelievable, nothing less than Adam Smiths heralded land of universal plenty” 8We were heading for this state of “universal plenty” in Britain and Europe and I believe mankind would have found a means to “roll it out” for all the world. However, much of the world now has a mass immigration crisis, and this will take us all “backwards” if not resolved soon. For our welfare, health and other systems, including Housing, are under unsustainable demand. The free market alone cannot resolve this, only temporarily mitigate it. However, it can be resolved if we are “allowed” to acknowledge and then address “the reason why”. ______________________8 The Worldly Philosophers by Robert Heilbroner Page 288 ................
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