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Affordable housing, for when the market has no answers

Notwithstanding its obvious vested interest, the National Housing Federation is right to call for a big increase in social housing.

Affordable housing, for when the market has no answers

What better timing for maximum media coverage than the tail end of an August bank holiday to drop an apocalyptic property market prediction?

According to a new report by the National Housing Federation, based on research and economic modeling by Oxford Economics, everything that’s financially painful for people who don’t currently own their own homes is about to occur, all at once.

Property prices will rise, and by 21.3% across the next five years, leaving the average home worth £260,304 in 2016. Levels of home ownership will drop back rapidly, back to mid-1980s proportions. According to the report, the percentage of UK residents who own their own homes will fall to 63.8% in 2021 (from a 2001 peak of 72.5%).

In the capital, the change will be even more dramatic, turning renting into the norm, with homeowners accounting for just 44% of Londoners. Rents, as a result, will also rise, by a similar rate to prices, and more people will need to rely on social and affordable housing, of which a chronic shortage will be exacerbated to emergency proportions.

As a brutal example of the two-sides-to-every-coin principle, this translated, in the Daily Express, to 'fantastic news for the property market'. A boom – driven by rising demand and a housing shortage – will be a welcome relief to homeowners struggling with negative equity. The managing director of a leading home search company greeted the projection as 'massively positive'.

But receiving the report more in the spirit in which it was intended: what’s the solution for the hard-working city-dweller who can’t afford to buy, and soon might not be able to afford to rent?

Unsurprisingly, since the National Housing Federation is a body representing the interests of housing associations, the solution put forward is: build. Build more affordable housing.

The National Housing Federation is hardly the first body to predict a social housing crisis. Back in March, the Institute for Public Policy Research – in a document looking at how different economic scenarios were likely to affect demand for different types of property – concluded that demand for social housing would increase, no matter what happened in the wider environment. Demand would outstrip supply by as much a further three quarters of a million households by 2025. But the IPPR’s reasons were somewhat different. The report cited immigration, life expectancy and a trend toward single person households… all more convincing reasons than house prices.

Despite a clear need, the outlook for building is cloudy. The government rhetoric is nicely polished, as the National Housing Federation discovered in minister Grant Shapps’s response to the report, a barrage of intentions and programs, from the decentralisation of planning control to incentivised construction, the selling off of state-owned land, easier/cheaper change-of-use of commercial buildings and the somewhat desperate-sounding increased planning permission for houseboats.

But there’s a little catching up to do. Last year saw just 105,000 new homes built, the smallest amount since the 1920s.

Where the government and the social housing pressure groups appear to be suffering a disconnect is that government policy, despite all the hurt and anger of recent years, still favours home-ownership as the single positive outcome. By building more homes, the government argues, prices needn’t spiral out of control again. This, despite recent experience showing that credit conditions are far more likely to affect a property market than the traditional supply-and-demand model. When credit’s cheap and plentiful, property prices rise, irrespective of the amount of new property coming available (look at the last UK boom, or the Spanish one). When it isn’t, people don’t buy because they can’t. If the government wants to get first-time buyers onto the property ladder, showing them homes they can’t get loans for won’t help.

Nor does it help groups like the National Housing Federation to launch a campaign off extravagant house price predictions. The report came just days after the latest Hometrack index showing falling demand, increasing discounts on asking price, increasing average times on the market before a sale (over three months for a third of the country), and an outlook for a further weakening market over the next six months.

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6 comments so far. Why not have your say?

steven fieldfare

Aug 31, 2011 at 14:29

My difficulty with the NHF need is:

they want public land released for affordable housing cost free (which would provide cheap and advantageous housing for some at cost to other house owning taxpayers).

affordable "homes" do not consider well built flats of modest rise (which would be less demanding on land and therefore less expensive to purchase)

there is little discussion of factors driving the shortage (single families, immigrants and often desire to live in attractive or prosperous areas otherwise unaffordable).

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alan franklin

Aug 31, 2011 at 20:41

When the market has no answers? What a misleading headline. Market forces have never been allowed to work in this country, certainly not in recent decades.

If the market was allowed to work, enough homes would be built to meet any need.

The reason they are not is that there are artifical constraints on many things, from building land to untold so-called " environmental" excuses for forbidding housing, like bats in the vicinity - or in the belfry of the planners!

There is much sub-standard, basically empty, useless land which could be immediately available for houses. The enviro-loonies might not like it - but then, they are mainly from cosy, middle class homes so thay are all right, then.

Small parcels of land on the outskirts of towns and villages could be made available for self-builders. Let's see what the enthusiasm of groups of young people acting together could do. It's more constructive than rioting.

There is no reason why simple, solid homes couldn't be cheaply built if only the forces of officialdom would get out of the way. And yes, we have personally tried it and retired hurt. You stand very little chance of getting a building plot in Britain unless you are a mega-builder looking to build hundreds of homes all crammed together without adequate space or parking.

Years ago Ikea came up with some excellent but cheap prefabricated homes, some of which, I believe are at last being built in Britain. We suggested this to them maybe 15-20 years ago and got no response.

Of course people should have the chance of a home of their own. But it will only happen when town planners are given useful work to do - like cleaning public toilets.

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Sep 01, 2011 at 11:35

Social housing is a must, certainly when you have such disgusting rent prices.

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Anonymous 1 needed this 'off the record'

Sep 01, 2011 at 13:01

It is essential that Central Government make adequate provisions for night shelters and soup kitchens, it is irresponsible to think Local Councils can do this, and they are not responsible for the necessary Central Government policies to try and keep the UK functioning economically.

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Rose G

Sep 01, 2011 at 15:04

Affordable homes - that is an oxymorona in the UK - there is not such thing. I was listening to Radio 4 & they were discsssing a scheme supported by Prescott where the cost of the homes built was affordable, but when it came to selling these properties, the lower cost was not reflected in the sale sale price - what this means is that developers have been greedy & selling the properties at market value even though public money was also used to build these homes - you cannot win in the UK. Successive govts have not commissioned new builds -they already are able to afford their homes on the nice comfy salaries & expense thrown in, the ordinary person cannot get onto the property ladder - unless families help out with loans/deposits & banks are not lending!

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steven fieldfare

Sep 02, 2011 at 12:00

Agree with Alan Franklin over prefabricated houses. I do not understand in a computer design and robot manufacturing age why we still build brick houses essentially unchanged in method since the Romans.

Redundant aircraft hangars and car factories would seem ready made locations for manufacture, leaving only footings and final assembly to take place in wind and rain.

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