Chancellor acts to address housing challenge as part of long term economic plan to build resilient economy
13 Jun 2014 02:46 PM
Chancellor takes action
to address risks that could emerge in the housing market and tackle the
UK’s long term housing challenge.
In his Mansion House Speech (Thursday 12 June), as part of the government’s long
term economic plan to build a more resilient economy for all, the Chancellor
took action to address risks that could emerge in the housing market and tackle
the UK’s long term housing challenge – by helping people achieve
their aspiration of owning their own home, while ensuring that we do not repeat
the mistakes of the past if risks do build up.
The Chancellor said that the
housing market does not pose an immediate threat to financial stability, but -
especially if we don’t learn the lessons of the past – it could in
the future, and therefore it is important to act now to insure ourselves
against future problems before they can materialise.
View the Chancellor’s Mansion House speech.
He announced that he is giving
further powers to the Bank of England to act if they think it is right to do so
– including, for the first time, the power to cap the size of mortgage
loans as a share of a borrower’s income or the value of the house. Latest
data on new lending shows that loan to value ratios remain well below their
peak, but that loan to income ratios are at a new high.
These new powers will be in the
form of further tools for the Financial Policy Committee (FPC), the new
independent body established by the government charged with ‘macro
prudential’ oversight of the financial system. The new powers will be
legislated for and in place, following consultation, by the end of the
Parliament.
The Chancellor has previously
said, and reiterated again in his speech, that the Bank should not hesitate to
use these new powers if they think it necessary to protect financial
stability.
He also said that if the Bank
does take action, then the same action will be applied to every single Help to
Buy mortgage as well. The Chancellor also used his speech, citing latest data
and the IMF’s conclusions last week, to reiterate that the Help to Buy
scheme is working as intended.
So that more families have the
economic security that comes with home ownership, the Chancellor announced
further reforms to planning rules which will provide permission for up to
200,000 new homes.
To deliver this, councils will
be required to put in place pre-approved planning permissions on brownfield
sites that are suitable for housing. Local authorities will apply local
development orders (LDOs) onto sites and we expect over 90% of suitable
brownfield land to be covered by 2020. This approach will allow developers to
get building sooner, saving them time and money.
We will create a £5
million fund to help local authorities create the first 100 sites with LDOs.
The government will also consult on a range of measures to enforce this
approach, including allowing developers to apply directly to central government
where councils have not done enough to remove planning obstacles on brownfield
sites.