by Robert Moss

Created on: February 13, 2009

Change in the housing sector, in how it is provided and funded, is necessary as a consequence of the current failure of the housing market to perform. Much of the change will be economic and some political, this is as a consequence of primary failings in the economic systems that housing provision and growth requires. Therefore problems within global financial, and economic systems, along with some of the political policies that have contributed to failure, will require replacement.

The provision of finance has contributed to the housing boom, the price collapse, and the consequent seizure of the housing market in many developed countries. The link between the housing market and the finance market is where reform will be concentrated. There will be casualties in terms of bank losses, repossession of some homes, but most significantly of all there will be political and finance system casualties. These latter will effect finance "system monopolies" (as opposed to business monopolies). These casualties are necessary to correct an unsustainable system, and are preferable to market collapse. There will of course be a need for a change of mindset, both commercially, politically, and consequently regulatory. This is a process that has already begun with the European Union's Capital Requirements Directive, which will become legislation around April 2009. The directive will contain the requirement that "originators" of financial products must retain a 5% stake in the products that they sell. It could have a transformative impact because it will mean if a product loses money, then so does the originating bank. (Shore 2008).

Although this process has begun, there are still manifest failures to adjust. Most noticeable among them has been Gordon Brown, UK Prime Minister, presiding over a reduction in the VAT (Value Added Tax) rate in order to encourage continued unsustainable retail spending. There is much to be done, but this is not the time to have a party!

The credit crisis is linked to the sub-prime mortgage business, in which US banks gave high risk loans to people with poor credit histories, these loans were then sold on to investors globally as bonds. Falling house prices and rising interest rates led to high numbers of people who could not repay their mortgages. At the same time banks stopped lending to each other as they had no visibility as to the bad debt each bank had. The lack of credit for banks, companies and individuals, is bringing with it the threat of

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