Wokingham needs a Home Information Pack holiday says John Redwood

As damaging uncertainty continues over whether or not the Government will introduce a stamp duty suspension or deferment scheme, John Redwood today called on Gordon Brown to use government powers to suspend Home Information Packs (HIPs) to help boost the beleaguered housing market.

Twelve months on from their introduction, there is growing evidence that HIPs deter speculative sellers, increase transaction costs, discourage sellers from changing estate agent and reduce the number of housing transactions – all compounding the economic downturn.

Ministers have powers to introduce a HIPs holiday now. When the Government pushed the Home Information Pack laws through Parliament in 2004, it slipped in a last minute concession to allow a government to suspend any or all of the HIP laws. Parliament does not need to be sitting for such a power to be used.

Five ways HIPs are harming the housing market:

1. HIPs discourage speculative sellers from putting their homes on the market and act as a barrier to entry; this restricts housing supply and so reduces the number of net housing transactions.

2. By duplicating the need for searches and not providing reliable information, HIPs increase transaction costs, increasing the net cost of moving home.

3. HIPs reduce market responsiveness, by discouraging people from changing estate agent if their house does not sell – as they may be asked to buy a new HIP.

4. The searches in HIPs go ‘stale’ if a house is left unsold for too long, increasing transaction costs in a slow market, and acting as a further deterrent to would-be sellers.

5. If the seller has opted for a so-called ‘free HIP’ – a deferred payment option – they will be hit with a fee if they want to change estate agent, on top of the cost of any new HIP with their new agent.

The Government has ignored warnings of harm to the economy from HIPS. Research by independent experts, Oxford Economic Forecasting, warned back in 2006 that HIPs would deter sellers and curtail the number of housing transactions by between 10% – 25%. In turn, this would cut consumer spending, reduce labour mobility and increase the medium term level of unemployment. Ministers ignored these warnings.

The Government claims that HIPs are necessary to meet an EU Directive which requires Energy Performance Certificates (EPCs). Yet in Northern Ireland since the start of July 2008, such Certificates have quietly been introduced for home sales without HIPs. Whitehall’s own Better Regulation Commission has slammed the UK Government for “gold plating” the EU Directive on EPCs, and imposing “additional administrative burdens [of HIPs] without adequate justification”.

Speaking about the need for a HIPs holiday, John Redwood said: “I believe that urgent action is needed to kick start the housing market in Wokingham. The Labour Government is dithering – and their spin and speculation over stamp duty is further undermining the market by making buyers wait and see.

“Before Home Information Packs were introduced, Labour Ministers ignored warnings from experts and industry that this new red tape would harm the housing market and the economy. These warnings are coming true, but Ministers are more interesting in saving face than saving homebuyers money.

“Gordon Brown only wants to talk about housing to create a distraction from Labour leadership speculation. If he genuinely wanted to help, he would use his powers to suspend Home Information Packs straight away. A future Conservative Government will scrap this unnecessary red tape completely, but a suspension now will deliver those benefits sooner rather than later.”