According to a 2016 Opinium poll 69% of Britons believe this country is experiencing a housing crisis. This is supported by findings in a Resolution Foundation survey, which illustrated that the proportion of families owning a home dropped from a high of 58% in 2003 to 51% in 2016 ('families' includes couples and single people). At the same time the subsidised social rental (council and housing association) sector has shrunk and the private rental sector has boomed.
In a rare occurrence of 'plain speaking' in a recent Government white paper it was stated that, "the housing market in this country is broken".
Older, better off people, aren't affected at all with home ownership in this group at historically high levels. For today's 30-year-olds it's a different story though – house prices have risen sharply and people in this group are now half as likely to own their own home as their parents were at the same age. Instead, 40% of this age group now live in private rented accommodation.
But this 'generation rent', particularly in big cities, is making do with less space and longer commutes than earlier generations – and housing costs are higher for them too. Finances for the average family have tripled since 1961 from 6% of income to 18% with private renters the worst hit.
Under-supply
Since 1997 the ratio of average house prices to average earnings has doubled meaning that, buying a house today, is likely to cost you more than seven times your annual income. It can be argued that people are richer now – mortgages are freely available and interest rates are low. But basic demographics – increased longevity, immigration and higher divorce rates – mean the demand for housing has risen at a great rate in recent decades.
A fairly steady average of 160,000 new homes have been built in England every year since the late 1970s and the number of households in the UK has risen by nearly 10 million in less than 30 years (from 18.5 million in 1988 to 27.1 million in 2016). Quite simply though, supply has failed to keep pace with demand and the Government states that at least 250,000 new homes are now required each year to tackle decades of under-supply.
Meeting demand
Planning laws, the lack of suitable land to build on and the slow-moving nature of the planning system, to allow time to take account of the concerns of local residents in and around a site marked for development, can all take their toll on housebuilders’ plans.
But what is the incentive for housebuilders to build in volume anyway? If too many homes are released, prices fall. It therefore makes it in their interest to hold land they could develop in order to keep prices high. As an example the four biggest housebuilders – Berkeley, Barratt, Persimmon and Taylor Wimpey [Guardian investigation] – were recently found to be sitting on 450,000 plots with planning permission.
Local authority
When Britain was building 2000,000 to 300,000 houses every year in the postwar period public authorities contributed to at least half of all new-build homes. That has decreased since 1979 with government grants for council house building scrapped and strict limits placed on the ability of councils to borrow. From April 2015 to March 2016 Britain built 147,960 new homes: 121,030 delivered by the private sector, 25,090 by housing associations and just 1,840 by local authorities.
In 2016 the House of Lords Select Committee on Economic Affairs called on the Government to allow local authorities to 'borrow to build', as many European councils do. But taking on new public debt at a time of austerity has not been supported by recent governments, although they have subsidised private homebuyers in the form of the Help-to-Buy loan scheme.
The Government white paper delivered in 2017 repeated the promise to build more houses and proposed a series of new measures including:
- That local authorities should be forced to make up-to-date plans for meeting housing demand
- That the planning system should be open and more accessible
- That developers should be penalised for not building on land they have planning permission for
Social versus Private
The private rental sector was liberalised in the 1980s – rent controls were scrapped and tenants rights loosened, making it easier for landlords to raise rents. The right-to-buy legislation introduced in 1980 resulted in the social rented sector declining. Buy-to-let mortgages were introduced in 1996, which saw private rentals balloon from 8% of families privately renting in 1989 to 18% in 2016.
Right-to-buy also drew a large part of the UK's postwar investment in housing out of the public sector forever. Public finances lost out twice over as families who would have had public housing are now housed in private rental properties on housing benefit at the state's expense.
At the Tory Party Conference in October 2017 Theresa May stated that her government would "start a rebirth of council housing" by providing an extra £2bn in funding and making it easier for local authorities to build homes for social rent. Housing benefit is the second-largest single item of public spending after pensions.
by Elizabeth Peel [Source: The Week]