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Get stuffed! Why we’re fed up with high house prices

By Rachael Emmett

We made this film to highlight how out of control the UK housing market is. The dinner is so expensive because we applied the rate of inflation on house prices since 1971 to food. Yes, it’s unbelievable. But so is the fact that many families are finding themselves priced out of the housing market. And, as the impact of this trickles down to individual lives, some of these families end up homeless.

No one would expect to see these increases in food prices over time, so why is it okay for house prices?

A shortage of housing in Britain is driving house prices up. They’ve increased at the same time that house-building has decreased. Put simply, demand is outstripping supply and making it more difficult for families across the country to afford their housing costs[i].

Furthermore, with a lack of social housing, more people are forced into private renting. High rents make saving up difficult and any sudden drops in income put millions of families at risk of losing their homes.

We know 3.8 million families are just one pay packet away from losing their home – a terrifying prospect for all of us – while hundreds of thousands of people are cutting back on essentials, just to meet their household bills. And this Christmas in Britain 93,000 children will be homeless, with thousands of others on the brink.

All in all, our housing market is both unaffordable and unsustainable.

To end the housing crisis and give more people the chance of a stable home, we need politicians to build more affordable homes.

So how did we calculate the costs?

The prices in the film were calculated by applying the rate of increase in house prices since the 1970s to how much the food items were priced at the time:

The figures we used to work all this out are below:

Average price in 1971 in Britain:               £5,646

Average price in 1974 in Britain:               £11,021

Average price in 1975 in Britain:               £11,812

Average price in September 2014 in Britain: £273,000[ii]

This gives an inflation of 48.34 times in 1971; 24.77 times in 1974; and 23.11 times in 1975.

This inflation multiplier was then applied to the 1971, 1974 or 1975 prices of a range of groceries, depending on the availability of prices for the goods. These prices were sourced from the Office for National Statistics, the British Library and the Sainsbury’s Archive.

Calculations are based on buying food for 8 people. Please see below for a full list of the items used and their weights or size.

Item

Weight/ Size

Year

Original price

Inflation

Inflated Price

Mince pies

12 (items)

1975

£0.52

23.11

£12.20

Turkey

11.2lbs

1971

£3.81

48.34

£184.10

Carrots

3.5lbs

1971

£0.28

48.34

£13.54

Sprouts

2.2lbs

1974

£0.52

24.77

£13.08

Lemonade

2 x 2l bottles

1971

£0.42

48.34

£23.15

Christmas pudding

2 puddings

1971

£0.54

48.34

£26.11

Gravy

12 cubes

1971

£0.12

48.34

£5.80

Potatoes

5.5lbs

1971

£0.50

48.34

£23.97

Stuffing

1.5lbs

1971

£0.20

48.34

£9.43

Cranberry sauce

2 x 250ml jars

1974

£0.32

24.77

£8.04

Pigs in blankets

1lbs sausages

1lbs bacon

1971

£0.24

£0.61

48.34

£46.84

Total

£366.25

 


 

[i]

 

 

Source: ONS House Price Index (table 22) and DCLG Live tables on house building, August 2014, Live tables on house building, August 2014 (table 209)

[ii] Information on house price inflation was sourced from the ONS House Price Index tables (table 22, formerly DCLG live table 502 and table 2).

 

 

Scott Dawes
 

By Scott Dawes

Local Welfare Assistance: How much are people worth?

Imagine for a minute that you’re 74 years old, and you’ve fled your abusive partner after decades of cruelty. Now imagine, finding a flat but having no money for a mattress, a bed, and no cooker or pans.

Sadly, Shelter has helped someone who didn’t have to imagine. For her, starting again was so hard that at one point she nearly went back to her husband.

Through local welfare this woman was given £900 for basic items which helped her to start a new life. Crucially, this meant she didn’t live in squalor and could rebuild her life with dignity, which helped her keep her resolve to leave her abusive husband. 

£900 to help someone in desperate need? Not a lot is it?

Across the country, Local Welfare funding totals just £178 million of the £700+ billion the Government spends every year. A fraction of the £1 billion the Government decided it didn’t need when it froze fuel duty. So really, for local welfare, we’re looking at a pittance for the Treasury.

But yesterday, the Government decided that beyond 2015 these people may no longer be worth their money and that a small investment to help people rebuild their lives cannot be justified; they plan to go ahead with cutting the local welfare budget in its entirety.

The government said that’s ok because there is now “separately identifiable funding” of £130 million so councils can fund them if they want.

Well, that doesn’t sound too bad does it?

Except, of course, this money isn’t extra funding; it’s from council’s existing budgets, and isn’t ring-fenced either, so it might never get to those in need.

Oh, and they also announced today that those very same council budgets have shrunk again too. So there is no money from government specifically for local welfare, and councils have less money in their budgets to fund schemes, assuming they wanted to. We already know that the LGA have warned 75% of councils will scale them back and some will cut them completely if this happens.

Sadly, this announcement comes following months of wrangling and a hard-won consultation on local welfare funding. We had 4,000 supporters respond to the consultation and our submission included cases  where the funding had helped people escape domestic violence, such as the woman leaving her husband after decades of cruelty.

Bizarrely, we found out today that the government will not respond to that consultation until February. But guess what’s also happening then? Yep, that’s when today’s announcements on the cuts are due to be finalised.

Now, when there is a Local Government Finance Settlement there is also an accompanying consultation where they ask for views on announcements. This happens every year, but strangely this time, there is an explicit reference to local welfare where the responses for all announcements are generally encouraged – no other announcement is mentioned (although of course there are questions on them).

So it’s not hard to imagine that there is something strange going on here. But is this just a stay of execution?

In the final hours before the finance settlement was agreed, there was a much rumoured split inside the Government – and not the usual coalition wrangling either.

With councils and charities screaming about the loss of funding, DCLG, including Secretary of State Eric Pickles, appeared to favour keeping the extra funding in line with recent spending (£70 million or so).

However, according to the media, this was seemingly blocked at the Treasury by the Chancellor George Osborne, despite endorsement from Chief Secretary Danny Alexander.

So we now have a pot of money that has been cut – unless miraculously revived in February – a delayed consultation response, a new strange consultation, an inter-departmental split, and a coalition split.

And all for a fraction of welfare spending for those is desperate need.

The big question now is whether DCLG and, increasingly, the Treasury see the value of helping those in immediate need and retain a decent level of additional funding for councils.

Shelter exists to ensure no one has to fight bad housing or homelessness on their own; it is our job to tell the stories of those who are worth every penny of help.

Adam van Lohuizen
 
Adam is Senior Economic Analyst at Shelter

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By Adam van Lohuizen

Property prices and household debt to only get higher and higher – OBR

The major announcement from the Autumn Statement released two weeks back was the cuts to stamp duty, cuts that will actually push up house prices. But the Office of Budget Responsibility (OBR) also released all of its forecasts that underpin government finances and the economy, including those for the property market. These tell us quite a lot about what it expects to happen in the housing market up until the end of the decade. Unfortunately, the picture it paints isn’t a pretty one – at least not if you aspire to get onto the property ladder.

The OBR expects that residential property prices will increase by over 10% this financial year. This is no surprise, as we’ve all read about the strong growth in house prices this year. But the further into the future you look, the greater your concern should be.

The OBR expect house prices to be 43% higher in 2019-20 than they were last year. This implies that the average house price will increase by over £100,000 across the next five years to exceed £350,000.

Such increases in property prices might be manageable if prices were currently affordable, and/or future rises in incomes matched that of property. But unfortunately they’re not and they won’t.

House prices in England were 6.5 times higher than incomes in 2013, almost double the ratio of 3.5 back in 1997 (a price to income ratio of 3 or below is considered to represent a balanced market). While incomes are predicted to grow at half the pace of residential property prices across the forecast period.  This will push the price to income ratio for England up to 8 before the end of the decade.

So how will we pay for rising house prices if incomes aren’t going to keep up? More debt – and a lot more. The OBR expect household debt relative to incomes to sharply increase from around 145% of incomes to over 180% of incomes by the end of the decade, easily exceeding the previous peak prior to the financial crisis in 2008.

If this scenario comes to fruition, then we can expect the impact on household balance sheets to be severe. We already know that households are concerned about the size of their mortgage, and will struggle with interest rate rises – rises that will come sooner or later. And the implications for the overall health of the UK financial system are similarly worrying – as the size of private debt levels enters unchartered territory.

These sky high levels of debt – and the burden on households that will accompany them – can only be avoided by building enough homes to stop prices rising, and provide enough genuinely affordable homes to offer people a real alternative to excessive levels of mortgage debt. It’s quite clear from its latest forecasts that the OBR doesn’t expect this to happen, but rather that the housing crisis will continue to get even gimmer. But the future isn’t decided yet, and we can avoid this bleak outlook if we start to build the amount of homes that we need now.

John Bibby
 
John is a Policy Officer at Shelter.

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By John Bibby

Does Affordable Rent really mean the end of social housing?

In 2010, Inside Housing ran a black front page predicting that the introduction of the Affordable Rent regime would mean the end of social housing. Yesterday we got a step closer to finding out if they were right.

The short answer is yes: at a time when we need more new social rented homes the Affordable Rent regime has shifted things further in the wrong direction by contributing to a net reduction in social rented homes of over 36,000 in 2013/14.

[i]

First, a quick refresh of what Affordable Rent is. The new regime introduced a new type of home (Affordable Rented homes) with rents charged at up to 80% of market rents and less secure tenancies than social tenants get (though they are more secure than typical private tenancies). Across the country rents in Affordable Rent properties are on average 71% of market rents. This compares to rents in social rented homes that are typically about 50% of market rents, with life-long tenancies. So social rented homes are – for low income families – much more affordable than Affordable Rent and much more secure.

There are two reasons for Inside Housing’s belief that this new regime could over time lead to the practical end of social rent. The first is that when it was introduced, government grant for new public sector rented homes was switched from social rent to the more expensive Affordable Rent. Most new social rented homes require government grant to get built, so the fear was this switch would lead to fewer and fewer new social rented homes being built.

This has proven to be correct. The number of new social rented homes built or bought each year has slumped from almost 40,000 in 2010/11 to just 10,000 last year. And it looks set to fall even further next year.

The second reason is that social landlords (both housing associations and council landlords) were encouraged to convert existing social rented homes to Affordable Rented homes when they become vacant and are re-let. So there would be more and more homes leaving the social rented housing stock.

This has also proven to be correct. Yesterday’s new stats on social lettings suggest that more than 16,000 social rented homes were converted to Affordable Rent last year.[ii]

When you add in the number of social rented homes demolished and the number sold (both through Right to Buy and other sales) the combined net effect is that there were more than 36,704 fewer social rented homes in England as of April this year than there were in April 2013.

This doesn’t necessarily imply that social housing is going to disappear entirely any time soon. There are roughly 4 million social rented homes in England, about 20% of all our homes, so at the current rate of loss it would take more than 100 years for the entire stock to be wiped out. And when compared to the number of homes taken out of the social rented housing stock when Right to Buy was in its heyday, the numbers still seem relatively modest. Almost 170,000 social rented homes were converted into private ownership through Right to Buy sales in 1982/83 alone.

But the long-term significance of Affordable Rent should not be underestimated. No matter what happens to the Right to Buy sales and demolitions in the future (and both are currently quite low by historical comparison), conversions of social rented homes to Affordable Rent look set to rise consistently. And vitally, the supply of new social rented homes has been all but turned off.

Managing the stock of social rented homes has always been a bit like running a bath with the plug out. But under Affordable Rent the plughole has both been made bigger and the tap has been turned off too.

All of this matters because we desperately need more social rented homes. Affordable Rent could be a good option for some people on middle incomes who just need a little help, but is unlikely to be affordable for those in most housing need. Without more new social rented homes, more and more people who are homeless or in housing need will be offered no option other than a home with a rent they can’t afford, forcing them to rely on housing benefit to bridge the gap. The housing benefit bill will continue to rise.

The realisation of Inside Housing’s grim prediction is something that we can’t afford to see happen. If we are to fully tackle the negative effects of England’s housing shortage, all political parties must commit to building more social rented homes.


[i] We are only able to estimate conversions because no official statistics exist. This number is the number of Affordable Rent homes that were let last year minus the number that were built last year. This does not take into account homes that have been built but failed to be let. This methodology will become increasingly unreliable as time goes on as more and more Affordable Homes are re-let. However, at present, only four years into the regime the risk of double counting is low.

[ii] These projections to not include social rented homes that have fallen out of use because they are no longer habitable or those that have been brought back into use because they have been made habitable. This graph currently also underestimates the number of social rented homes demolished in 2013/14 as no data on demolitions of council-owned social rented homes has yet been published. Given previous years this will likely mean a further reduction in social rented stock in 2013/14 of at least 1500 homes, as the smallest number of council-owned social demolitions recorded in the last decade was 1870 in 2012/13

Shannon Harvey
 
Shannon is Head of Research at Shelter

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By Shannon Harvey

Open data gets social tenants moving

Today, Nesta announced Viridian Housing’s MoveMaker app as winner of the Housing Open Data Challenge. Originally cheekily billed as “Housing Tinder”, MoveMaker connects people in social housing who want to move homes, allowing them to easily compare their current property with others’ and make informed decisions about where to move. It’s not the first product to do it, but existing websites are clunky and expensive, and you have to send out endless messages to everyone whose property you like, without knowing whether they’re also interested in your property. Like Tinder, MoveMaker simplifies the process of contact and follow-up by only connecting people who are interested in each other‘s properties.

As a judge for the Challenge, what I loved most about MoveMaker is that it’s a simple idea, well-executed, and with its users at the heart of the process. As a digital tool, it’s cleanly designed and straightforward to use. As a social tool, it tackles a real and urgent problem. The app idea came out of the struggles Viridian staff saw their clients facing: young, growing families overcrowded in tiny apartments, parents whose twenty-something children have moved out having trouble meeting the extra costs of the “bedroom tax”, and older people who’ve become disabled no longer able to manage their second storey home. While mutual exchange (social tenants swapping homes) isn’t a new idea, it’s traditionally been incredibly difficult for people to find a workable match. MoveMaker might just change that.

But the competition isn’t really about great digital products: it’s about open data. When the competition launched back in the summer, we wrote about how open data could power change for renters. The thing about open data, though, is that in its raw form it’s not particularly useful for anyone except us research geeks. That means that we need to integrate it into simple web and mobile tools, bringing together the large, disparate open datasets, so that we all have the information we need to make informed decisions. That belief informs our own Housing Databank, which is designed to help professionals get quick and easy access to data on homelessness, housing need and house building.

For people already struggling in an unsuitable home, finding a safe and affordable place to move to is stressful enough. Having the time to dig out all the information you need to make the right decision for you and your family is next to impossible. MoveMaker uses open data to make this process transparent. The app rates properties on the key services in the area, such as schools, GPs, public transport, shops and jobs. Users can compare services in their current area with the area they’re thinking of moving to, via a straightforward traffic light rating system that takes all this complex data and distils it into a single-glance snapshot.

As an advice provider, Shelter has always been about empowering people by giving them the information they need to find the solutions that are right for them. Judging this competition, the innovative spirit of all the participants made me feel enthusiastic again about the opportunities this new combination of open data and digital and mobile technology provides. With evictions by social landlords on the rise again after years in decline, easy-to-use digital tools can shift some of the balance of power, giving people back some control over their housing situation and helping them to find suitable, affordable homes for them and their families.

All that said, we can’t expect digital tools and open data to be a panacea for the housing crisis. Ultimately, apps like MoveMaker are a piece of the puzzle that will help some people move on from unsuitable housing. It’s a great innovation, but on its own, it’s not a solution. What we really need is to build more homes, with a fair, realistic mix of market, intermediate and social homes.

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