Government subsidies for building houses are wrong.

What a stupid policy! Financing by government aimed at stimulating the housing building business. Thus creating more and more sub-prime mortgages. The policy will simply mean more money in the pockets of builders, more people over-extended with debt and banks excused the risks of lending.

What needs to happen is quite different.

Lower prices for houses and land.

Simply house prices have to come down. Houses cost £40,000-£70,000 to build, and they could cost even less with factory made, mass production pre-fabricated designs. But the land to build them on costs up to twice as much. So it is land prices that have to come down. Councils that own land and want houses built on it, have to realise that they cannot sell it for ridiculous prices. If they want to house people they have to give away the land to do so.

Bank risk

Add this to banks having a new policy, strategy, call it what you will. A bank loans £100,000 to buy a home. The home equity falls in a slump to £80,000. The home owner is now in negative equity and has taken 100% of the risk in buying the house. The bank still demands the full repayment of £100,000! This has to stop, the risk has to shared, so that the amount to pay back goes down if the market falls (and up of course if it rises…) and the bank has to dynamically re-value the loan and take some risk.