Housing: the real big squeeze

The Shelter campaign that seems to have stuck in people’s minds the most in recent years was the one setting out what the cost of household goods would be if their prices had gone up at the same rate as house prices.

I most recently heard it mentioned by Planning Minister Nick Boles when he launched another new planning policy to encourage development.

We’ve re-run the analysis – a whole chicken would now cost £51.18, and the average weekly food shop for a family of four would be £453.23. You’d struggle to find anyone who would find that an acceptable price to pay – even if it was all free range, organic and raised in Kensington and Chelsea.

My sense is that public attitudes are shifting on whether rising house prices are ever ‘a good thing’.

I recently met up with some old colleagues (from a wide range of backgrounds and never having worked in housing), and they were unanimous in worrying about their children’s future. How would they ever be able to afford to live in the area they grew up in, how would they, as future grandparents, be able to help with childcare?

That’s the thing: it wasn’t so long ago that you could comfortably afford a decent home without a whopping great salary.

Nick Boles said something quite cutting when he mentioned the Shelter research a few weeks ago: that Britain could be dragged back to the nineteenth century, when only the rich could afford to own a home. It’s potent because all parents, understandably, want their children to do at least as well as them, if not better. As far as housing is concerned, that’s looking pretty hard to achieve.

So what can government do to bring the cost of homes back within reach of ordinary people?

Many would say we need more mortgage lending again. But it was reckless mortgage lending (combined with a lack of new homes that pushed prices up so unsustainably in the first place. The salaries needed to finance mortgages on high house prices are way above the national average. That’s surely a major reason for why the 95% mortgages offered by the NewBuy scheme have so far only helped 3,000 people buy a home (against the Government’s estimate of 100,000) – borrowing 95% of £200,000 is a lot of money when the average salary is £26,000.

Or do we need more first time buyer schemes? Recent governments have created a plethora of them. But they aren’t working. Right to Buy seems to have run its course and is unlikely to help the next generation, while the FirstBuy scheme led to just 3,499 homes being built in the six months to September 2012.

My view is that we need to develop a much more comprehensive scheme to help people on lower and middle incomes get a decent, affordable home, and at Shelter we’ll be developing ideas for that in the coming months.

Ultimately, though, it comes down to building far more homes than successive governments have in recent decades.

Some of this is about speeding up the planning system, some about the supply of land – and government is beginning to put actions behind the words on these. But investment feels like the missing link and bolder ideas are needed for how we finance the new homes we desperately need.

As housing costs rise up the political agenda (and I haven’t even mentioned private rents and waiting lists!), government must begin demonstrating that they are bringing the dream of an affordable home back within reach of ordinary people.

It will be critical for government to use the upcoming Comprehensive Spending Review to signal strong intent – housing is looking set to be a key issue for ordinary families at the 2015 general election.

  1. An important factor in the increase in house prices is buy to let – easy credit for a buy to let property (even now, you can get mortgages for BTL of 100% – and more! – of a property when regular mortgages are harder to obtain). BTL pushing house prices up both increases the cost of buying AND the cost of renting. Some sort of cap on the amount of rent charged would have the result that landlords wouldn’t pay over the odds for the house due to reduced returns, and would stop the upwards spiral. I’m currently trying to buy my first home, and without fail, estate agents ask me ‘is this to rent out?’. I’m a single person in my mid-late twenties, not the demographic that we would have seen as a potential landlord not too long ago, and yet it would be easier for me to buy somewhere to rent out than it would be just to live in it.

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