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Chris Leslie: Don't let regeneration become another victim of credit crunch
YORKSHIRE'S city centres have come on leaps and bounds in the past 10 years, overcoming some of the problems of industrial decline and experiencing a commercial renaissance with a strong retail experience, diverse culture and modern urban lifestyles.
Yet the current economic climate is threatening to destabilise this carefully constructed regeneration – and the property market is poised on a precipice.
One thing that all political parties can agree on is that no matter how badly the credit crunch affects the economy, nobody wants to see a repeat of the number of house repossessions that we saw in the early 1990s. Ensuring that vulnerable households are given support to help them continue to pay their mortgage in difficult economic circumstances has been made a priority by the Government, who have allocated 50bn to kick-start the housing market and appealed to banks to only enforce repossession as a last resort.
Little, however, has been said about the role local councils might be able to play in helping to avert the current crisis. A fact no doubt unknown to many is that local authorities have a history of providing mortgages and would routinely lend to hundreds of thousands of local residents right up until the early 1980s.
Indeed, councils were at first the only lender willing to offer
mortgages to right-to-buy customers as mainstream banks and building societies viewed them as too risky an investment. Local communities do not have to be passive travellers on this economic journey; they do have an option of clubbing together, through their local authorities, and deciding to act to intervene and prevent the worst excesses of the financial turbulence.
Today, the New Local Government Network is calling on the Government to look afresh at the potential for councils to step in to directly help those residents facing greatest difficulty. Under the scheme, councils could act as mortgage providers under prudential borrowing rules, in which interest rates can be lower than commercial rates.
They would then be able to lend lower-rate mortgages to people
who are struggling to meet bank payments under their current
loans. In particular, this might offer salvation to the many people seeing sharp increases in their payments having had to re-mortgage.
With mortgage defaults up 17 per cent this year, and likely to top 100,000, supporting those areas hit hardest could be vital to sustaining communities. Government should set 2bn of its 50bn intervention package aside for supporting these measures, and allowing areas facing property price turmoil a chance to apply for this potential mortgage fund resource. This could help up to 15,000 people out of difficulty and even provide a long-term profit to the taxpayer, who can take a longer term view than many of the banks these days.
I am sure that there will be opposition to this idea. Why, you might ask, should we be using public money to prop up homeowners? Surely they knew the risks when they bought a property and, in any case, haven't many people profited from high house prices over the past decade? These are fair arguments, but surely as a community we all have a duty to ensure that we support those most in needs at times of financial strain – and it is in all our interests to stabilise the property market.
After all, many Yorkshire cities have encouraged city centre living, and a collapse in this market could reverse the prosperity that has seen an economic and retail renaissance over the past decade.
I believe it is in all of our interests to limit the amount of repossessions to a minimum, not only because it would save many families from financial ruin and misery, but also because we could be directly bolstering the regeneration of our towns and cities. Such schemes are already commonplace in the United States and local mortgage intervention is a key part of Barack Obama's strategy for reviving the flagging US housing market.
There is also a social justice case for stepping in. According to Experian, five out of the top 10 areas most threatened by the credit crunch are in the North, with Brightside in Sheffield deemed to be most at risk. London and the South-East, who have done so well out of the housing boom, do not appear in the list, with the remaining five places made up by Birmingham, Nottingham and Belfast. It is clear therefore that a further rise in repossessions or premature sales would disproportionately affect the North, often in already deprived areas. Given this information, the Government could decide to target support towards those areas most in need.
In calmer economic times, councils could still offer financial packages, perhaps targeting first-time buyers who are struggling to get on the housing market. Crucially, councils could offer the protection and stability of a high-street bank, with a genuine commitment and interest in cultivating its local economy. We have seen the reputation of the private banking industry fall sharply over the past few months. a
Perhaps it is time for councils to step into the breach and stave off the worst effects of the credit crunch in our towns and cities.
Chris Leslie was the Shipley MP from 1997-2005 and is now director of the New Local Government Network. The NLGN today publishes a report Good House-keeping? Stronger communities through local housing intervention.
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Saturday 26 May 2012
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