The Leader of the Council's online diary - August 2008
The lack of availability of new mortgages is starting to have an impact. People who want to buy their first property find they can't. People who need to move find it more difficult. The market for homes is seizing up because of the credit crunch, and that is threatening regeneration projects across Britain. A group of council leaders - including me - have written a letter published in the Times last week. We're calling on the Government to allow councils to step in and use their borrowing powers to offer mortgages in certain circumstances. Councils already invest in local infrastructure - look at the money Lambeth's investing in new leisure centres and schools across the borough, for instance. There's an opportunity for councils to offer help to homeowners that could help the economy keep moving during the current downturn - and that in turn could help stop the credit crunch turning into recession, with the worrying prospects that would have for people’s jobs and incomes in Lambeth and across the country.
Here's the letter that's in the Times:
Sir, The credit crunch could have a serious impact in local communities across the country. Evaporating mortgage availability may place hard-fought regeneration in jeopardy unless rapid action is taken. With inter-bank lending at a standstill, we believe that there is a pragmatic need for the local public sector to step in and offer much needed new mortgage capacity.
Preventing a precipitous collapse in the housing market and restoring stability is in everyone's best interests. In 1980, 600,000 mortgages with homeowners were held by local authorities. Since then, the banking industry has almost universally taken on this role. Today we need a more balanced approach, involving both private and public sectors offering mortgage finance.
The public purse should not just be used to mop up the problems caused by banking difficulties. The Government should recognise that councils are well placed to take a judicious share of mortgage business - an opportunity that could yield a surplus for the council tax payer.
We call on the Government to urgently consider three reforms. First, legislation should allow councils to offer targeted deals to the public and the provisions specifying a blanket "standard national interest rate" for council mortgages should be reformed. Secondly, the Government should ask the Public Works Loans Board actively to encourage councils to revive their public banking functions. Thirdly, the Chancellor should set aside public borrowing capacity for council mortgage provision and frame new guidelines in conjunction with local authorities.
Councils are already supporting much needed community facilities, including rescuing local post offices from closure and investing in the retail and transport infrastructure. Allowing local government to carefully intervene and support homeowners is a sensible step which we urge ministers to consider seriously.
Cllr Sir Richard Leese
Leader, Manchester City Council
Cllr Helen Holland
Leader, Bristol City Council
Cllr Gerald Vernon-Jackson
Leader, Portsmouth City Council
Cllr Steve Reed
Leader, London Borough of Lambeth
Jules Pipe
Mayor, London Borough of Hackney
Cllr Jamie Carswell
Lead Member for Housing, London Councils
Chris Leslie
Director, New Local Government Network