Housing, Housing, Every Where…Nor Any Place To Live

With increasing calls for more house building, is the UK's housing crisis one of supply, or something more?

With increasing calls for more house building is the UK’s housing crisis one of supply, or something more?

The Story

We need to build more homes; a lot more. That is the current housing argument du jour, most recently espoused by business secretary Vince Cable who suggested that up to 300,000 new homes a year are required to meet soaring demand.

So, by thy long grey beard and glittering eye,now wherefore stopp’st thou me? Because this is not the first call for more homes – indeed, the cry has been building. (Forgive the pun.)

The Good South Wind Still Blew Behind, But No Sweet Bird Did Follow…

“This is a big challenge for our country. We have got to build more homes.” – George Osborne

Vince Cable’s alarming call for 300,000 new homes a year is not without support; the National Housing Federation has also suggested England needs to build 240,000 new homes a year just to meet demand.

And they are not the only ones. The Town and Country Planning Association “can’t see how the nation can house itself within the current planning system alone”, and called in February this year for a wave of new settlements to tackle the crisis, a call that was taken up by the Nick Clegg, who has announced the creation of three new garden cities to help deal with the UK’s “chronic” housing shortage. Even English Heritage are considering the problem, asking in Issue 72 of their Conservation Bulletin how we can use traditional housing, historic building conversions and sensitively designed new homes to meet demand.

What basis is there to suggest that there is a housing supply crisis, though? Certainly, local authority waiting lists must be considered. Below is a chart from the Department for Communities and Local Government report, Local authority housing statistics: April 2012 to March 2013 England:

Source: Local authority housing statistics: April 2012 to March 2013 England, Department for Communities and Local Government, December 2013

Source: Local Authority Housing Statistics: April 2012 to March 2013 England, Department for Communities and Local Government, December 2013

There were 1.69 million households on local authority waiting lists on 1st April 2013 – this is a decrease of 8.6% from the previous year, where 1.85 million households were on waiting lists. However, we should not conclude from these statistics that waiting lists are improving. Firstly, 1.69 million households is still a lot of households waiting to be housed. Secondly, as the above chart shows, waiting lists have been steadily growing over time, indicating an increasing crisis of supply. Finally, the recent Localism Act has given local authorities the freedom to manage their waiting lists, modifying criteria regarding who qualifies for housing – 46% of local authorities are reported to have changed their waiting list criteria since 2011-12, which goes some way to explain the sudden, anomalous dip in waiting list figures.

Local authorities have also experienced a reduction in housing supply, due in part to a reinvigorated Right To Buy scheme. Local authorities owned 1.68 million dwellings on 1st April 2013, meaning the total number of dwellings owned by local authorities is not sufficient to even match the demand of current waiting lists, disregarding that the majority of the homes will already be occupied by tenants. This number is starker when viewed in the context of history – in April 1st 2001, 2.81 million dwellings were owned.

But social housing owned by local authorities is only part of the picture. The Housing Building Federation’s publication, Barker Review, a decade on, suggests the shortfall of homes over the decade now stands at an estimated 953,000 homes – equivalent to the total number of homes in Birmingham, Wolverhampton, Solihull, Walsall and Dudley. It goes on to say that to achieve the very modest objective of slowing the increase in the affordability gap so that fewer new households are priced out of the market, 200,000 private housing starts are now required each year. ‘‘Improving the housing market’, would now require 320,000 private housing starts per year over a sustained period – a figure achieved in England in only four years since World War II.

George Osborn has warned that Britain’s housing shortage is likely to persist for at least 10 more years, so if building more homes is the answer what does the current state of housing building look like?

A Weary Time! A Weary Time!

In their March quarterly review, the Department of Communities and Local Government report that annual housing starts totalled 133,650 in the 12 months to March 2014, up by 31 per cent compared with the year before, while annual housing completions in England totalled 112,630 in the 12 months to March 2014, an increase of 4 per cent compared with the previous 12 months.

While both housing starts and completions are up in the last 12 months, these statistics are not cause for suggesting the housing crisis will be averted any time soon. Firstly, the number of completions, 112,630, is far below the number of homes that the NHF HBF and other organisations are claiming are required to even have a modest impact on housing supply – depending on which claim you look at, the number is barely 50% of what is required.

Further, there is a noticeable gap between the number of housing starts and housing completions; half-finished, empty shells will not solve supply issues. Of course, we are to expect a time lag between starts and completions – it takes time to buy land, gain planning permission, and finally build a property – but regardless of this, the number of homes being built in the UK is still well below its all-time high (425,000 in 1968.)

But even if housing completions were matching the numbers being called for, new dwellings alone will not solve the housing crisis if people cannot afford to live in them.

The Very Deep Did Rot…

“Just one thing such as a job loss or serious illness can tip any of us in to a downward spiral that puts our home at risk.” – Campbell Robb, Chief Executive: Shelter

According to new research from Shelter, more than 215,000 homes in England are at risk of eviction or repossession, the equivalent of 4,140 households threatened every week or almost 600 a day. While there is cautious talk of an economic recovery, the reality for many people is that our financial situation has not truly stabilised; any impact on household income threatens the capacity of people to stay in their homes. The fear is palpable – the Daily Mail reports that one in three home owners believe a rise in interest rates will put them in financial difficulty.

The rot goes deeper than undermining the ability of people to reliably keep their home; many cannot even afford to secure a home in the first place. A recent report by the National Association of Estate Agents said that 94% of new home owners in a month were aged 31 or over – “Home buyers under the age of 31 have become an endangered species.”

The inability for young people to purchase a property is not entirely due to the current economic situation. We must remember that many young people looking to buy homes are graduates, and as such will not usually secure reasonable employment until their mid-twenties (and even this is becoming increasingly optimistic). With such a late entry into the job market, it is understandable that by the time they have saved sufficient…er, savings, and increased their salary to a level that can reasonably allow a mortgage, they will no longer be ‘young’ people. Of course, inflating house prices are also part of the problem – the National Housing Federation suggest that house prices will rise by 35% by 2020 – and the more they rise, the longer this wait becomes. Those who cannot secure jobs with decent salaries or afford to save regularly, graduate or not, will find the wait even longer.

Those in the private rented sector are also feeling the pinch: on average, rents currently take up half of an English person’s disposable income, but in 10 years that will have risen to 57% – by 2020, rents are expected to increase by an average of 39%.

A Sadder and Wiser Man, He Rose the Morrow Morn

There is a crisis in housing, but it is not just of supply – it is a crisis of affordability. No matter how many new homes are built or dwellings freed up, if people cannot afford to pay a mortgage or rent, or even finance living in them day-to-day, new homes will not avert the growing housing crisis.

This is not just the affordability crisis that is being seized upon by the media – that of the increasing difficulty to buy a home. The crisis is one where people are struggling to simply afford to live in homes. Increasing outgoings in rent and/or mortgage aside, the cost of living is so high, the economy so depressed, and the jobs market so precarious that no matter what kind of property or tenure someone is able to secure there is now a daily battle to keep the roof over their head.

Put plainly, housing supply is irrelevant if people cannot afford to live in the homes that are supplied. Building new homes is important, but there are broader socio-economic issues – wage imbalance, job security, and the cost of living – to resolve if we are to tackle the UK’s true housing crisis.

References

Barker Review, a decade on, Home Builders Federation, March 2014

Conservation Bulletin Issue 72, English Heritage, Summer 2014

House Building: March Quarter 2014, England, Department for Communities and Local Government, May 2014

Local authority housing statistics: April 2012 to March 2013 England, Department for Communities and Local Government, December 2013

Home truths 2013/14: the report in numbers, National Housing Federation, Online: http://www.housing.org.uk/media/home-truths/home-truths-report-in-numbers/, Available: May 2014

Housing crisis? No, just a very British sickness, Simon Jenkins, The Guardian, Online: http://www.theguardian.com/commentisfree/2014/may/21/no-housing-crisis-just-very-british-sickness?utm_source=twitterfeed&utm_medium=twitter, Available: May 2014

Housing crisis will continue for 10 years, George Osborne warns, The Guardian, Online: http://www.theguardian.com/society/2014/feb/04/housing-crisis-george-osborne, Available: May 2014

Housing starts at six-year high, but completions fall, BBC, Online: http://www.bbc.co.uk/news/business-26271803, Available: May 2014

Housing think-tank calls for wave of new towns, Financial Times, Online: http://www.ft.com/cms/s/0/e0f856f6-9d42-11e3-83c5-00144feab7de.html#axzz32YCxT4Hg, Available: May 2014

Just 6% of homebuyers under 31, Inside Housing, Online: http://www.insidehousing.co.uk/finance/just-6-of-homebuyers-under-31/7003829.article?utm_source=twitterfeed&utm_medium=twitter, Available: May 2014

Lloyds sets mortgage cap as London property fears rise, The Guardian, Online: http://www.theguardian.com/business/2014/may/21/lloyds-mortgage-cap-london-property-fears, Available: May 2014

Three garden cities to be built, Nick Clegg announces, BBC, Online: http://www.bbc.co.uk/news/uk-politics-27020578, Available: May 2014

One in three homeowners fear an interest rate rise will put them in financial difficulty, The Daily Mail, Online: http://www.dailymail.co.uk/money/mortgageshome/article-2636459/One-three-homeowners-fear-rate-rise-financial-difficulty-says-new-survey.html, Available: May 2014

Shelter says 4,000 households at risk of losing their home every week 24Dash.com, Online: http://www.24dash.com/news/housing/2014-05-21-Shelter-says-4-000-households-at-risk-of-losing-their-home-every-week?utm_source=dlvr.it&utm_medium=twitter#.U35NUtJdXw8, Available: May 2014

Post-Script

Post title and sub-titles inspired by The Rime of the Ancient Mariner, a classic poem where the protagonist – a mariner – having undergone a gruelling ordeal in the vastness of the ocean warns others of his folly and, having learnt harsh lessons, becomes a “sadder and a wiser man”.

While there are allegories with the UK housing crisis described above, I mostly ran with the theme because I thought the post title was cool.

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