Azara Blog: Another idiotic government scheme to subsidise housing for the few

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Date published: 2006/10/02

The BBC says:

Extra help for up to 20,000 key workers looking to get on the property ladder is on offer from Monday.

The Open Market HomeBuy Scheme will see the government and selected lenders funding up to 25% of a property cost.

Interest payment start after five years but it should help borrowers afford more expensive property.

Borrowers will still have to fund the remaining 75% of the property cost through a standard mortgage or their own savings.

The scheme will be open to public sector workers and those on council housing waiting lists.

Applicants will be assessed by HomeBuy agents, employed by local housing associations.

Once the applicant has been accepted onto the scheme they will have 12.5% of the property value loaned to them by the government and 12.5% by a lender, drawn from selected banks and building societies.

This 25% loan will be interest free for the first five years but if the property is sold the government and lender will be entitled to a share in any increase in its value.

The government said that its portion of the loan will be interest free indefinitely.

The 25% loan will help the borrower afford a more expensive home than would have been the case if they had had to rely on just a mortgage and their own savings as a deposit.

Another idiotic and unfair government scheme which helps a few politically correct categories of people and which leaves the majority of house buyers not only no better off but also forced to subsidise the few to leapfrog them on the property ladder. If this scheme was any more widespread it would not only start to hit government finances it would also start to push house prices up, because all subsidies by the government of house buying has exactly that effect. So in the end it would be a self-defeating move, of benefit mainly to house builders (as if they need any help). By restricting the number to so few people, the government is at least limiting the damage they are doing. What the BBC article does not mention is that although the buyer will (quite rightly) only get 75% of any profit when the house is sold, if the housing market turns down then the government and lender will get hit with the first 25% of any price reduction, and this is ridiculous. The buyer only gets an upside, and not any downside. If only everybody else in the housing market was lucky enough to be so supported. We need more houses, not more crackpot schemes of benefit only to the politically correct few. We need a government of all the people, not of some of the people.

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