Boris Johnson’s 95% mortgages will put Britain back on course for a house price crash | Josh Ryan-Collins | Opinion

This week Boris Johnson boasted that his government would “turn generation rent into generation buy” via a return to 95% mortgages for first-time buyers. In other words, easier credit to help more people buy houses.

To say we have been here before would be an understatement of epic proportions. Since the days of Margaret Thatcher, every UK government has sought to cut through the housing affordability problem with the easy and politically popular option of subsidising the demand for homeownership. Generally, this has taken the form of liberalising mortgage regulation or providing direct government subsidies for first-time buyers, most recently the various help-to-buy schemes. All have failed to bring down the price of homes.

More demand for homeownership leads to more more credit flowing into an inherently limited supply of homes. Most housing in the UK is provided at market rates by private landlords and private sector developers. These groups have no incentive to increase the supply of housing to match this increase in demand, since they generate their profits from increasing, not decreasing, prices.

The result, inevitably, is house price inflation. As result, homeownership for younger adults on middle incomes has halved in the UK in the last two decades. Similar outcomes have been seen in other advanced economies – more mortgage credit does not stimulate supply when the provision of housing is left to the market.

British politicians and policymakers seem unable to recognise these simple facts. Indeed, it took a massive financial crisis over a decade ago for politicians to allow the tightening of mortgage regulation in any significant way. Johnson may not be aware of the fact that there were quite a few 95% mortgages around leading up to the housing bubble that precipitated the UK’s 2007-9 banking crisis. The resulting economic catastrophe led to them being phased out. Along with other restrictions on borrowing, these policies helped dampen the growth of UK house prices and household debt (currently around 85% of GDP, down from a record 95% in 2009), although it has been increasing again in recent years.

One can only imagine the Bank of England’s reaction to Johnson’s announcement. The Bank has been carefully nurturing its post-crisis financial stability mandate and delicately implementing “macroprudential policy” powers to stifle excessive lending in the domestic and corporate real estate sector. Johnson clearly doesn’t see much value in such an approach when there are votes to be won.

The UK remains locked in a self-defeating “doom loop”: falling levels of homeownership lead governments to loosen mortgage regulation, resulting in increasing household debt and house prices, leading to a housing bubble and eventually a financial crisis, leading to stricter mortgage regulation, which is then blamed for falling homeownership and so on.

What then is the solution? Do the opposite of current policy. Reduce, rather than increase, the demand for homeownership, and in particular the demand for housing as a financial asset. Implement higher and fairer property or land value taxes that reduce unearned capital gains that generally

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Boris Johnson’s 95% mortgages will put Britain back on course for a house price crash

This week Boris Johnson boasted that his government would “turn generation rent into generation buy” via a return to 95% mortgages for first-time buyers. In other words, easier credit to help more people buy houses.



a person standing in front of a store: Photograph: Guy Bell/REX/Shutterstock


© Provided by The Guardian
Photograph: Guy Bell/REX/Shutterstock

To say we have been here before would be an understatement of epic proportions. Since the days of Margaret Thatcher, every UK government has sought to cut through the housing affordability problem with the easy and politically popular option of subsidising the demand for homeownership. Generally, this has taken the form of liberalising mortgage regulation or providing direct government subsidies for first-time buyers, most recently the various help-to-buy schemes. All have failed to bring down the price of homes.

More demand for homeownership leads to more more credit flowing into an inherently limited supply of homes. Most housing in the UK is provided at market rates by private landlords and private sector developers. These groups have no incentive to increase the supply of housing to match this increase in demand, since they generate their profits from increasing, not decreasing, prices.

Related: Lenders left wondering how PM’s homeowners pledge will be achieved

The result, inevitably, is house price inflation. As result, homeownership for younger adults on middle incomes has halved in the UK in the last two decades. Similar outcomes have been seen in other advanced economies – more mortgage credit does not stimulate supply when the provision of housing is left to the market.

British politicians and policymakers seem unable to recognise these simple facts. Indeed, it took a massive financial crisis over a decade ago for politicians to allow the tightening of mortgage regulation in any significant way. Johnson may not be aware of the fact that there were quite a few 95% mortgages around leading up to the housing bubble that precipitated the UK’s 2007-9 banking crisis. The resulting economic catastrophe led to them being phased out. Along with other restrictions on borrowing, these policies helped dampen the growth of UK house prices and household debt (currently around 85% of GDP, down from a record 95% in 2009), although it has been increasing again in recent years.



a person standing in front of a store: ‘Homeownership for younger adults on middle incomes has halved in the UK in the last two decades.’


© Photograph: Guy Bell/REX/Shutterstock
‘Homeownership for younger adults on middle incomes has halved in the UK in the last two decades.’

One can only imagine the Bank of England’s reaction to Johnson’s announcement. The Bank has been carefully nurturing its post-crisis financial stability mandate and delicately implementing “macroprudential policy” powers to stifle excessive lending in the domestic and corporate real estate sector. Johnson clearly doesn’t see much value in such an approach when there are votes to be won.

The UK remains locked in a self-defeating “doom loop”: falling levels of homeownership lead governments to loosen mortgage regulation, resulting in increasing household debt and house prices, leading to a housing bubble and eventually a financial crisis, leading to stricter mortgage regulation, which is then blamed for falling homeownership and so on.

What then is the solution? Do the

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State Dept. provides House Dems docs previously given to Ron Johnson’s Biden probe

The State Department on Friday turned over 16,000 pages of documents to a House committee that were previously given to Senate Republicans investigating Joe and Hunter Biden — providing Democrats with key information as a top GOP senator prepares to release a report expected to be highly critical of the Democratic presidential nominee.

The massive document production to the House Foreign Affairs Committee led Chairman Eliot Engel (D-N.Y.) to rescind his July subpoena for the documents and pause the panel’s contempt proceedings against Secretary of State Mike Pompeo.

It also comes as Sen. Ron Johnson (R-Wis.), who is leading the GOP probe targeting the Bidens, is teasing a forthcoming report detailing the allegations, which center on Biden’s son Hunter and his role on the board of Burisma, a Ukrainian energy company. Johnson has said his report is likely to be published next week.

Democrats have described Johnson’s probe as a politically motivated smear campaign against President Donald Trump’s challenger that has already been discredited and tainted by Russian propaganda. The intelligence community has identified a pro-Kremlin Ukrainian lawmaker, Andriy Derkach, as an agent of a Russian disinformation campaign intended to denigrate Biden.

“This ‘investigation’ is obviously designed to boost the president’s campaign and tear down his opponent, while our own intelligence community warns it is likely to amplify Russian disinformation,” Engel said in a statement. “We’re going to make sure the American people see the whole picture, not just cherrypicked information aimed at breathing new life into debunked conspiracy theories.”

Democrats have raised concerns that material gathered by Derkach, who met in December with Trump’s personal lawyer Rudy Giuliani, has been laundered into Johnson’s material. Johnson has strenuously denied the allegations, but Democrats sought the documents he obtained from the State Department to understand the direction his probe is taking. POLITICO first reported that Derkach mailed information about the Bidens to Johnson, but Johnson’s office has denied receiving anything from Derkach.

Derkach has pushed many of the same claims against Biden that Johnson, who chairs the Senate Homeland Security and Governmental Affairs Committee, is pursuing. Johnson’s probe centers on allegations that a Democratic public-affairs firm sought to leverage Hunter Biden’s position on the board of Burisma in order to influence the Obama-era State Department.

Johnson has also alleged that Hunter Biden’s role was itself a conflict of interest because his father, who at the time was the vice president, was spearheading U.S. policy toward Ukraine.

Johnson has drawn condemnation in recent weeks for characterizing his probe as potentially fatal to Biden’s presidential candidacy, a political calculation that Democrats said removed any doubt about the goal of his investigation.

Some Republicans have expressed discomfort with Johnson’s probe, too. Sen. Mitt Romney (R-Utah) last week described it as a “political exercise” and said he opposed Johnson’s efforts to subpoena additional witnesses as part of the investigation. POLITICO reported earlier this year that Sen. Richard Burr (R-N.C.), then-chairman of the Senate Intelligence Committee, warned Johnson that his probe could aid Russia’s

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