Britain’s Housing Crisis: Not What It Seems – But Much Worse
By Graham Vanbergen – EQUITY Research Centre: The foundations of Britain’s contemporary property and housing market came about immediately after the First World War, continued after the second and its workings didn’t change that much for decades, until the arrival of a new economic ideology that created today’s housing crisis.
It is abundantly clear that the roots of this particular crisis are deeply embedded in Britain’s political and financial system and it is therefore a problem that can only be fixed financially and politically. It is also clear that politicians are going to need a high degree of people powered ‘nudging’ to do something about it, as successive governments have failed even in their most basic duty to house its own citizens.
The rot set in when privatisation of the social housing stock through Margaret Thatcher’s ‘Right To Buy’ scheme was introduced. Another blow was the so-called financial liberalisation of the mortgage markets. Allowing the ‘free market’ to decide what was best for us all put any aspiring home-owning citizen heavily in debt to the banks. But by then, any chance of staving of the housing crisis was over as the egregious privatisation of public land took hold and land prices soared to new heights with every passing year.
There was a new expectation that prices (for land, housing and rents) would increase which of course they did – relentlessly. Since 1980, on average, house prices across the nation then increased by 7% per year with the greatest annual increase of 25.6% in 1988. The subsequent crash was government induced, lasted a decade and was described by the Chancellor of the time Nigel Lawson as ‘a mistake’.
In recent years though, a number of government inspired market-distorting interventions such as Help To Buy (to name just one of many) has contributed to an inevitable housing crisis never witnessed before in Britain.
In researching much of the important information for the EQUITY Research Centre database, some interesting statistics, many of which are dire, have emerged.
For instance, figures released by the Office for National Statistics show that UK wealth grew nearly 10% during the year 2016/17. This is the largest rise on record and put the UK’s total net worth at £9.8 trillion. Far from being the kind of growth that would help people, it is one of the trends exacerbating inequality and making homes less affordable, as half of that entire growth came from property and land values alone.
THIS WOULD, IN PART, EXPLAIN HOW HOUSE PRICES HAVE RISEN SO FAR OUT OF REACH OF ORDINARY PEOPLE, THAT HOME OWNERSHIP HAS NOW FALLEN TO THAT OF 1918.
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This is hardly surprising. Research found that on the 1st January this year, in 8 of London’s 33 boroughs, not a single home on sale qualified for the government Help To Buy scheme. In other words there were no new-builds worth less than £600,000 up for sale in Campden, Hackney, Hammersmith, Islington, Kensington and Chelsea, Lambeth , Tower Hamlets or Westminster.
Indeed this situation is so desperate that just 603 homes qualified for the scheme across the whole of the capital as at that date.
It should not be forgotten just how much other factors have affected the housing crisis. Just one of many is the sheer scale of foreign buyers. It is estimated that wealthy global and non-resident buyers have funnelled more than £100bn into London property over recent years, much of it laundered through tax havens.
IF THESE WEALTHY BUYERS HAD ACQUIRED AVERAGE HOMES AT AVERAGE PRICES THEY WOULD HAVE ACQUIRED 2 MILLION HOMES IN THE CAPITAL ALONE. THE FACT THAT MANY OF THEM BUY SOME OF THE MOST EXPENSIVE AND EXCLUSIVE HOUSES AND APARTMENTS IS OF NO RELEVANCE – IT STILL DRIVES UP PROPERTY PRICES.
From here, it’s downhill all the way. A new study finds that only 1% of UK councils reported that their need for affordable homes is not substantial.
More evidence of a failing housing market is in analysis of government figures. It highlighted that rented housing is now so squalid it is likely to leave many tenants requiring medical attention. It is estimated that 338,000 homes rented by people under 35 have been deemed so hazardous they are likely to cause harm.
This is likely to mean that over half a million people are starting their adult lives in such conditions amid a worsening housing shortage and rising rents, which are up 15% across the UK in the last seven years, whilst incomes remain stagnant – or in real terms are falling.
TO TAKE THIS RESEARCH ONE STEP FURTHER, IT HAS BEEN FOUND THAT THE SHARPEST END OF THE HOUSING CRISIS, THE AVERAGE AGE OF DEATH FOR A HOMELESS PERSON IS NOW JUST 47 YEARS OF AGE. IN THE MEANTIME, ROUGH SLEEPING HAS INCREASED BY OVER 130% SINCE 2010 AND IS NOW COSTING THE GOVERNMENT £1BN A YEAR.
The negative effects continue as there’s still more bad news. According to research, the last 10 years has seen a collapse in home ownership among young people. This research found that in 2004, there was 60% home ownership amongst 25-34 year olds – the key child bearing demographic, a figure which has fallen to just 35% by 2014 and still rapidly declining. This has been described as a demographic ‘time-bomb’ as young adults decide not to set up home and have children.
PWC reports that by 2025 a quarter of all UK’s housing will be rented, rising to over half for 20-39 years olds. In London, the proportion of households renting has already passed the 50% mark.
The future of the housing crisis, irrespective of the economics of the housing market is bleak in the current political environment.
Our database will be continually updated but already there is a consensus emerging for the underlying reasons of the housing crisis. First is that not enough homes are being built – but just as importantly, not enough of the right homes are being built. Second is obvious – property prices are too high and third, that market interventions by government have only made the crisis worse.