Steve Midgley is Managing Director of Fairgrove Homes.
Over the last few weeks, I have seen a fair bit
of criticism of the new Help to Buy schemes. But to kickstart
construction, it is vital that we have action – even if it is only temporary –
to tackle the drought in mortgage finance.
As a small family-run builder in the Midlands,
when the economic crash hit in 2008, we were badly affected. Today, five years
later, we are starting to see signs of a real recovery. But the legacy of the
financial crisis – particularly a lack of mortgages – is stifling the housing
market and house-building.
Housing construction is one of the best ways to
stimulate the economy. Every £1 spent on construction creates around £3 of
activity; hundreds of thousands of people are employed in house-building and
related industries; there are hardly any imports in housing construction so
domestic economic growth is stimulated. And of course we all know that we need
There are three main factors which affect
levels of house building:
Over the long-term, the main constraint has
been the planning system and the lack of permissioned and viable land for new
homes. In the last couple of decades, a huge burden of regulation has
stifled construction and harmed companies like mine. But most importantly, the short-term constraint
we face now is the lack of mortgage finance available.
While the current Government has made changes
to the planning system – and the industry is hopeful that they will bring
positive results – time will tell the full impact they have. Action tackling
regulation has been slow, and red tape remains a serious handicap to my business
growing and building more houses.
On mortgage finance, however, the Government
has obviously understood the need for immediate and tangible action. The Help to Buy schemes announced in the Budget
could have a transformational effect on house-building. The equity loan part
follows on from a very similar scheme called FirstBuy and only applies to new
FirstBuy originally was difficult to use for smaller companies like ours
– it required a certain scale and significant investment up front. But
this new scheme is much easier and should be far more widespread. The
industry's trade body, the Home Builders Federation, says that there have
already been more than 3000 reservations through Help to Buy in just two months
and on Friday my company got our agreement from the Homes and Communities
Agency allowing us to use it.
It’s almost working too well, as my son has
risked parental wrath by reserving his first home using Help to Buy with one of
our local rivals! For us, Help to Buy will quickly increase
sales. We will be able to increase construction output and build more homes in
our local area. Everyone around us will benefit with more jobs and
opportunities for businesses and related companies to grow.
The mortgage guarantee aspect of the Help to
Buy scheme will follow on from, and run alongside, NewBuy. NewBuy was
conceived of by the house building industry with mortgage lenders and supported
by government. It has proved significant. After slow take up, we are now
seeing how mortgage guarantee measures help to support and boost housing
transactions – and therefore supply.
Every week we see people – from first time
buyers to growing families – who see the huge deposits required and simply
can’t get a foot on the property ladder. These are the people who will benefit
from Help to Buy. While elements of the scheme have recently come
under scrutiny – and rightly so – a properly implemented scheme will have a
positive effect on the market around us. For us, that means one thing: we can
build more homes.
The Government has taken action to try and
boost supply of new homes with planning reform and policies like public
land disposal. But without a corresponding increase in effective demand those
homes will not get built. If buyers cannot buy, builders cannot build and the
recovery will be postponed. As a small builder, I'm hopeful that Help to Buy
will deliver the transformation it offers. Of course only time can tell. But
the signs are promising.