Osborne's measures to improve housing affordability are baffling

At the Treasury Select Committee this afternoon chancellor George Osborne said that he was keen to make housing more affordable. This follows attacks on the chancellor's new Help to Buy scheme which claim that the measure will increase house prices. The Office for Budget Responsibility suggested that the scheme could inflate prices this morning.

Osborne said that he wanted to increase the availability of higher loan-to-value mortgages, but not to the levels seen offered by those such as Northern Rock before the crash. Crucially, the chancellor misses that the housing crisis is one of shortage and not scarce demand. Strict planning permission rules prevent builders from creating new homes, keeping prices high and new buyers off of the property ladder. Cheapening credit will serve to increase prices further, and could create a new asset bubble in housing.