The Housing Challenge
November 12, 2007
Housing is emerging as one of the key political battleground issue over the years to come. In the Queen’s Speech the government announced the formation of the Homes and Communities Agency to deliver affordable homes. That decision has to be seen in the context of promises, as yet unfulfilled, over the last decade to provide affordable homes to a younger generation increasingly priced out of the housing market.
No one should be any doubt as to the complexities of this issue. Our country has a growing population but little spare land. Our young people have expectations of home ownership and high quality living conditions at affordable prices. We have a level of immigration which helps keep wages low and demand for housing high. But we also have an adult population generally contented with the way things are and do not want their home environments cramped by new developments. What is required now is a firm hand on the tiller with a true understanding that building houses without infrastructure investment leads to local difficulties, chaos and unhappiness for all. No one will escape the changes that are needed if we are to cope with this country’s expected population growth.
There seems to have been no strategy on housing for years, except for the Government to pat itself on the back over a “bust-free” economy without worrying about the unsustainable, runaway “boom” in the housing market. Well, the chickens are certainly coming home to roost now. Population growth in this country is expected to be immense over the next two decades. In the principal projection, the population of the UK is expected to grow by 10.5 million between 2006 and 2031. Some 4.9 million of this increase is directly due to the assumed number of net migrants.
Official figures ? never reliable at the best of times ? reveal that the overall population of the UK rose by 349,000 last year. Judging by the inaccurate census figures in this decade and the government increasing official immigration statistics week by week recently we are better off looking at the true figures from the housing market to see the real pressures on people putting a roof over their heads.
First-time home buyers ? competing with the swelling population of immigrants who accounted for at least 55% of last year’s population growth ? are at an all-time low. The average age of a new entrant to the property market is thirty-four. The average house price is now nearly eleven times earnings, and in London that figure is more like thirteen, making the capital the most unaffordable place to buy a home. In my neighbouring constituency of Kensington & Chelsea, house prices are over twenty times the average local income! Nationally, house prices have risen four and a half times faster than incomes over the past decade. Supply lags behind a fast-rising demand for residential homes.
However, the popularity of the ‘buy to let’ market also means that such new housing supply that emerges is often being sidetracked into investment and second home purchases. Sadly the general lack of confidence in the providers of pensions and other savings products has always helped accentuate the trend towards investment in property. As many as two thirds of all new homes built in London are being snapped up by investors rather than as a main residence. It is estimated that around ninety percent of development schemes in Thames Gateway (which experts regard as the key to opening up housing supply in the Capital) will be owned by investors, not owner-occupiers.
The increasing number of people being priced out of the housing market leads in turn to additional strain on the social housing and housing association sector. The number of people living in temporary accommodation has doubled since 1997. This is a sector already over-burdened, yet at the same time, central Labour government has built less social housing than was built at any time in the 1980s and first half of the 1990s. As a result, the number of households on housing waiting lists has risen to such an extent that one household in thirteen here in England is now on a social housing waiting list.
Clearly, the very British notion of a property-owning democracy is now under grave threat. It is an issue about which many voters care passionately. Political parties have not been slow to recognise this in their placing of the house-building issue near the top of their agenda but they need to be honest in their policies. It is impossible for this country to allow council house building as it did in the 1950s and 1960s. Similarly it is impossible that councils can be forced to stop developers building high density housing where there was once unused common land and fields.
First, and most obviously, the matter concerns the young families and professionals who want to get onto the housing ladder. Month after month we see yet another newspaper headline about house prices. As they move inexorably upwards, so a generally younger new generation of would-be homeowners makes the economically distorting decision to tie-up savings and long-term future income on bricks and mortar. This move towards risky borrowing has resulted in an ever increased threat of repossessions, which rose by a staggering sixty-five percent last year alone.
But it is worth pointing out that the rate of housing price inflation has not wildly outstripped other forms of saving. Only in the past two years have houses caught up with the 10-times rise in the stock market since 1980.
This issue is every bit as pressing a political concern for those in their later years, superficially sitting pretty on mortgage-free equity gains from the booming property market of recent decades on their property. The older generation are now understandably fearful as to how their offspring will ever be able to replicate their good fortune. Today the norm is that grown -up sons and daughters have to choose between the unenviable option of either overstretching their finances to afford a mortgage or else simply being unable to move out of the family home.
My own Conservative Party recognises the pressing need for an immediate and substantial increase in development of residential housing. The National Housing Federation estimates that we are building around 55,000 fewer homes each year than we need. The government’s headline-grabbing announcement of new towns and a target to build three million homes by 2020 may still prove insufficient to meet a household growth projection of nearly four million by 2021.
But the practical implication of all this goes to the heart of the Conservatives’ dilemma. We must think long and hard whether the planning system should be in the hands of local, district Councils rather than organised at a strategic, regional level. With an increasing number of local authorities being Tory held (205 Councils in England are Conservative controlled following this year’s local elections), voters are looking with interest at out success in performing local duties when assessing whether or not to entrust us with national governance. Above all housing is the litmus test of whether politicians fully embrace the electorate’s concerns. There is no better way to pit the aspirations of the many against the instincts of Tory MPs and councillors to restrict the programme of building that needs to take place. There is also a keen inter-generational potential for conflict ? elder folk (largely already homeowners) need to avoid being seen as wanting to deny the younger generation the same opportunities they themselves had.
Of course we need to protect Green Belt ? it would be irresponsible not to recognise the strong desire to avoid simply concreting over such countryside that still exists especially in the South East of England. Yet, such a hard-and-fast safeguard should not be at the expense of over-intensive development on anything that happens to lie outside the Green Belt. Whilst scrapping the current regime of density targets which force people to live on top of one another, we also need to avoid the creation of a shortage of family homes with all the resulting social consequences.
In rural and suburban parts of Southern England there is a common misconception put about by community leaders (including Conservative MPs and Councillors I am bound to add) that endless brownfield sites are available and all new development can be exclusively concentrated there. However this simplistic analysis ? espoused most vocally by those keen to see the benefits of more housing but not in their immediate district ? overlooks the issues surrounding decontamination of brownfield land. Likewise, to build extensively upon flood plains such as the Thames Gateway should, after the events of summer 2007, be seen as the folly it is. Frankly there is no easy way to square the circle ? for sure, there is not enough brownfield land which can be built on in London.
Community spirit will also die if urban planners regard the answer to our housing supply problem as the construction of large new cities in the model of the post-war New Towns. That spirit requires proper infrastructure ? from public transport to schools to GP surgeries, shops and pubs. New communities cannot be conjured from the central government desire to fulfill housing targets alone.
Some sensitive new development is needed if we are also to protect village life. Villagers stand to benefit from tasteful local housing development, not least as young people with a local connection can often be encouraged to stay. Tasteful expansion of our existing villages, whether or not on Green Belt land, should also promote local rural services, such as shops and post offices, which have been subject to cost-driven closure in recent years. Infrastructure needs to lead the case for housing development, rather than being a casual afterthought.
In addition, Conservatives have pledged to abolish Stamp Duty for first-time buyers on homes valued at under £250,000. As a result, nine out of ten first-time buyers (though I fear relatively few in my constituency) would no longer pay any Stamp Duty. This proposal should help 200,000 young people realise their dream of owning their first home but in truth it may only be a small help in this harsh environment of unaffordable properties.
The challenge of housing, despite many warnings as to the need for homes for local keyworkers, has been ignored as property prices have risen in inner cities such as here in my own constituency. Alas the many people who have prospered so mightily out of the property market over the last ten years are now showing signs of begrudging the next generation similar opportunities.
We may see a substantial increase in our young people emigrating to better climes in the years ahead because the young are much more aware of the opportunities in this global marketplace than ever before. We want the best and the brightest to remain here. We need to encourage teachers and other trained professionals to use their skills here. We should promote wage structures which make this possible but we also need to recognise the strong desire to build a home without it being a financial noose around the necks of the young or the only answer to their desire to save for the long-term.
I fear we shall repent that this first decade of the 21st century was the best of times. The many deep mistakes in government policy over our housing, education, health and other social structures will haunt us and our brighter young people in the decades to come.