Gordon Hector

The right to own is not all right

There was much to commend in Chris Skidmore’s article in the Telegraph earlier this week, calling for a radical approach to public services. But there’s one bit that’s worth dissecting: his idea that people in social housing might sell their homes to invest in shared equity, if they behave well. Here’s what he says:

Any social housing tenant, under certain conditions of tenure and behaviour, would be able to sell their property and retain a proportion of the equity, reserved for investing in a shared equity programme, giving them a first step onto the housing ladder. The remaining equity would be used to build more affordable housing to meet demand. In this way, dead equity of around £4 billion could be unlocked, creating a new generation of home owners.’

It’s easy to see why the ‘right to own’ is attractive. Shared equity can seem good value for the government as it’s a cheaper way to subsidise housing, and it’s supposed to be the route into full ownership for residents.

But we should question expanding home ownership in such a volatile market. We’ve been used to rising prices over the past 15 years, but historically we’ve had epic booms and busts – 4 major crashes in 40 years. Just a month ago, Standard and Poor’s said that negative equity had increased by £17billion in a year. Owning a home is not a one-way bet. And Fraser’s already examined the macroeconomic risks: an artificial focus on home ownership skews policy towards cheap credit. We all know how that ends.

And this idea also suggests landlords would use that equity to build more.

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