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A Response to the Housing and Mortgage Crisis

September 12, 2008 2:35 PM
Originally published by UK Liberal Democrats

The Liberal Democrat Autumn Conference will today debate the party's plans to help families who are unable to pay their mortgages and facing the threat of homelessness due to the downturn in the housing market.

The proposals, which aim to reduce repossessions and increase the stock of social housing, include: Introducing regulated Mortgage Rescue Schemes to allow families struggling with repayments to sell all or part of the equity in their house and rent it back from a housing association or private firm to help keep them in their home.

Allowing councils and housing associations to borrow money to buy up land and empty new homes for use as social housing.

Giving courts guidelines to only allow homes to be repossessed as a last resort, making the mortgage lenders' voluntary code binding on all lenders.

The full text of the motion is below.

Mover: Dr Vincent Cable MP (Liberal Democrat Shadow Chancellor of the Exchequer)

Summation: To be announced

Conference notes that:

i) House prices have continually fallen since last autumn, with further falls predicted, putting millions of people into negative equity.

ii) 1 million households spend more than two-thirds of their income on housing according to a recent survey by Shelter.

iii) The number of repossessions and repossession claims have more than doubled in the last five years, reaching a 15-year high in 2007.

iv) Under this Government the social housing safety net has dwindled from 4.386 million social homes to rent in England in 1997 to just 3.936 million social homes in 2006 while the number of households on social housing waiting lists has risen almost 70% to 1.67 million and notes that the Local Government Association predicts that this could rise to 2 million households by 2010.

Conference supports the policies passed in conference motion Homes for All in spring 2008 to increase the supply of sustainable social and affordable housing.

Conference acknowledges:

a) The current dramatic falls in house prices are the result of an unsustainable bubble that formed in the housing market fuelled by irresponsible lending.

b) Throughout the period of unsustainable growth in the housing market the Government made no attempt to deal with the housing bubble, or to crack down on irresponsible levels of lending.

c) That while it is not the job of government to prevent house prices falling to a more affordable level, it is not in the interest of the economy as a whole if negative equity and repossession leads to large numbers of people becoming homeless and over-indebted.

Conference therefore calls on the Government to:

1. Allow councils and Registered Social Landlords to borrow against their assets to buy up unsold properties and sites from building companies in order to replenish the social housing stock, to deal with the current 1.67 million households on social housing waiting lists.

2. Introduce a statutory Code of Practice for mortgage lenders to ensure that repossession is the only ever the last resort - all borrowers in arrears should be offered:

a) Free independent financial advice.

b) A chance to renegotiate the terms of their mortgage.

c) An opportunity to sell equity in their home to a Registered Social Landlord (RSL) and become part-tenants of that landlord, dependent on meeting the requirements of the RSL.

3. Protect vulnerable homeowners against rogue doorstep companies by regulating the private 'sale and leaseback' market as a financial service through the Financial Services Agency.