12 March 2021
What is Talking Point?
Cambridge News asks a representative of each local political party to answer a question on a local issue in just 300 words. The answers are then published in the physical copy of the Cambridge News every week. Here, we share our response to the question.
Today's Question: Do you think the new 5 per cent deposit mortgage scheme will be helpful in getting first-time buyers on the housing ladder in Cambridge?
While the 5 percent mortgage scheme may seem to offer help to first-time buyers, the deeper reality is that they are being drawn into a massive asset bubble. It is not they who benefit, but rather fat-cat developers and, even more, those who own the land. And that is before we start talking about the many thousands who are excluded from the housing market altogether. Let me explain.
Cambridge is among the most unaffordable cities in the country. In 2019 the average house cost 15 times the average income in the city. And it is not just an issue of supply and demand. While the cost of buying a home has skyrocketed, rents, which are a much more accurate reflection of supply and demand, have not risen in the same way. Historically low interest rates and simple speculation are what drive up prices. Commentators have pointed out that the housing market suffers from a ‘bitcoin problem’, in short, it is a bubble.
Currently the cost of the land makes up 70 percent of the cost of a new house. Projections from the IPPR predict that that will rise to more than 80 percent in the next fifteen years. For comparison, in the 1930s the ratio was just 3 percent.
The many developments that are proposed around Cambridge as projects for addressing the housing shortage are no such thing. They are an immense cashing in by the owners of the land, who are trousering millions for doing very little. Those millions are provided by the buyers of the properties, among them the first-time buyers who take advantage of the 5 percent mortgage scheme.
The Green Party has long proposed a land value tax to take the heat out of the housing market. Now that would really benefit first-time buyers.
Today's author is Naomi Bennett. Naomi is an accountant and a long time resident in Abbey Ward. She stood as the Green candidate in the City Council elections in 2019 and doubled the Green share of the vote. She is standing again in 2021.