Wednesday, 8 February 2012

They own land! Give them money!

Today's instalment is a game of two halves up in Manchester:

Council chiefs have unveiled radical plans to help the housing crisis... £25m of pension cash is to be used to build new homes. Bosses have identified five sites on which it aims to build nearly 250 properties for sale or rent as part of a pilot scheme. The Greater Manchester Pension Fund will pay for the construction costs and the programme could be rolled-out over 10 years if it proves successful....

Fair enough. That's peanuts against a population of a half a million, but it's a start. The council can grant itself planning permission for free (no doubt they'll end up buying expensive land which already has planning, from the council chief's brother-in-law, separate topic), so it's good money for them/their pension fund (not even local councils can mess this up), more houses built, jobs for people, might even get prices down a tiny bit etc.

... As part its plans, Manchester council also wants to create a mortgage guarantee scheme to help people get on the property ladder by underwriting up to 20 per cent of their loan.


Doesn't that just wipe out all the financial advantages of building more houses in the first place? Building them is risk free profits for the council; once they are built, they get their money straight back from the purchaser's mortgage bank, and like I say, it's good news for people locally, whether that's jobs or housing.

But if you lend out the pension fund to merely try and keep prices high, that's a very risky investment for the pension fund and makes things worse for young people. The best thing that could happen to young people is for lending criteria to become much stricter, like in the good old days.


Steven_L said...

Or just rent them to the young people? Have an auction and see what young people will bid for a secure but transferable long term tenancy?

It is a bit comical. Council folk are the first to wail on about responsible, traditional banking, bailouts and toxic derivatives and stuff.

So then they set up what could be a sensible scheme, then issue a load of toxic guarantees and promote to their youth getting on the property ladder - or what could just be the final blowout of a giant ponzi scheme.

Mark Wadsworth said...

SL: "Or just rent them to the young people?"

Do you mean a bit like social housing? Poo! How are "hard working households" supposed to "build up capital" if we don't bet the farm on selling them overpriced housing?

Bayard said...

I think a lot of people in authority are beginning to realise that the whole Ponzi scheme isabout to collapse because people have stopped coming in on it, so they are trying to effectively bribe them to do so. I don't think this is anything more than realpolitik: the political fallout from a housing market collapse is obviously well known.

Mark Wadsworth said...

B: "the political fallout from a housing market collapse is obviously well known"

Yes, which is what infuriates me about the Lib-Cons.

Any rational government would have allowed house prices to crash on coming to power in 2010 and then blamed it, perfectly reasonably and plausibly, on mismanagement by the previous lot.

With the system cleaned out, after a year or so, the economy would have started picking up nicely and by 2015 they'd easily be re-elected.

The fact that the Lib-Cons didn't do this leads me to the assumption that they are in on the scam, they are acting on behalf of the Home-Owner-ist elite (bankers and landowners) in the same way as Labour did.

Bayard said...

I think the bankers must have taken their eye off the ball with John Major's housing market collapse, or perhaps thay have just learnt their lessons from it. They, after all, would be the ones to suffer most from the collapse. There was probably a hand on DC's shoulder and a voice in his ear saying "Dave, old boy, don't even think of doing it" and so it wasn't done.

Anonymous said...

At least most Tory voters are outspoken/outright Home-ownerists, so they are just listening to their voters.

As for Labour, only the politicians are rich.

Anonymous said...

Isn't this just FRAUD.

Basically the council employees granting themselves the windfall gain from the planning permission.


Bayard said...

"Isn't this just FRAUD."

Er, no.

"Basically the council employees granting themselves the windfall gain from the planning permission."

Why is that any more fraud than giving the windfall gain to a developer? It's only fraud if no developer on God's earth could have got PP on those sites and we don't know that to be the case.

R said...

I wonder if individuals contribute to this pension fund? To add to the usual risk in investing, I bet they didn't know that the council would be taking on a job normally done by professionals, I.e. judging risk and underwriting mortgages.

Bayard said...

"I bet they didn't know that the council would be taking on a job normally done by professionals, I.e. judging risk and underwriting mortgages."

Wouldn't they get in conslutants to do that?

Anonymous said...

re ? R 10:07 -

Greater Manchester Pension Fund is the pension scheme for the ten local authorities in Greater Manchester and a host of other kindred bodies, such as schools, colleges and charities***.

We are part of the nationwide pension scheme for local authorities, the LGPS.

*** and certain categories of "national authority" staff - such as those persons we used to refer to a members of the probation service and then had learn to call members of the National Offender Management Service ...under the complete dismembering, sorry, reorganisation and improvement, as carried out by the previous shower in office ...

Which could mean that the funds being played about with to keep the price of houses high in Manchester are those effectively belonging to those categories of "public sector workers" that, from time to time, you hear "politicians" refer to as requiring "cheaper, more easily accessed housing" so that said public sector workers can be living closer or closer to where they work, and also, that those that work in Manchester don't, because the cost of housing (private or rented) in Manchester is 'too high' (because um their employers have been buggering about with 'clever schemes' which keep up the cost of housing) decide to go off and work somewhere else where these things aren't happening, and they can find somewhere to live that they can afford. So the Manchester scheme is therefore BRILLIANT !!!!

JuliaM said...

" The council can grant itself planning permission for free..."

Sound plan. However, when you are counting on another council granting it, you're on a sticky wicket!