Britain undoubtedly has a housing shortage crisis.
There are way too many people looking for somewhere to live, compared to what is available on the market. This sends prices soaring and in turn the poorer parts of society are unable to get on the ladder.
Even worse, this trickles down into the rental market and makes it even more difficult to find somewhere affordable to live – especially for those on welfare – because rents rise too.
The Confederation of British Industry (CBI) warned last year that 240,000 properties need to be built annually, in order to accommodate rising demand across the country. Unfortunately, over the last 14 years, over 200,000 homes have been delivered annually in just four periods.
The Right to Buy scheme brought in by Margaret Thatcher’s government has become a popular target for the understandable anger over the housing crisis – but it’s the wrong target. Blaming the ever-widening gap between supply and demand on Right to Buy is not only myopic, but does nothing to find a solution for the millions of people trapped in either the rental property or those needing social housing.
Take note, Labour mayoral candidate Sadiq Khan, who says the government’s plans to extend the policy will make the housing crisis worse.
The Right to Buy scheme helps tenants in council and housing association properties – basically social housing but with private non-profit landlords – to buy the place they live in by giving them a discount of up to £103,900 in London and £77,900 outside London.
This sounds terrible, right? I mean, it’s pretty much a dream come true for left-wing politicians, who are evidently not in power at the moment, to seize support and votes by battling against it. After all, Britain is in desperate need of housing and to most vulnerable in society are being left behind again because people are buying up the last bit of social property left.
In reality, it’s nothing more than a political football, does nothing to solve the root of the problem and what the government needs to do to get Britain building more affordable houses.
Right to Buy is not the problem
Contrary to popular belief, the Right to Buy scheme wasn’t originally a Tory policy. It actually was in Labour’s 1959 manifesto – the Tories just stole it 1980 under the early days of Margaret Thatcher’s government.
You can look at it two ways.
One way is that it’s one of the only viable ways of some of Britain’s lowest earners to own the home they live in instead of paying the landlords and of course releasing the burden on the taxpayer. In turn, the former council tenant gets to own an asset which they use in whichever way they want. It helps social mobility and gets generations out of a trap of relying on the state.
On the other side, it can be seen as a snowball effect of privatising what affordable housing is left in the UK, meaning generations of the poorest Britons will struggle to find a home. Critics of Right to Buy usually neglect to point out the obvious fact that those buying under the scheme are some of the lowest earners in Britain and the only thing that has changed is that the new purchasers are able to invest in their own asset rather than line the pockets of a landlord.
But the problem isn’t something the so-called “sell-off” of social housing, nor is it something new – Britain is just simply not building enough properties that are affordable for the poorest to middle income earners at all.
Encouraging building but not affordable housing
Britain’s housing shortage cannot be blamed on this government. It has to be blamed on all the governments that preceded it too.
The country’s issue isn’t actually just about getting builders to build houses. Britain has a poor history of allocating social housing out of new builds.
According to the Department of Communities and Local Government, during Labour’s rule in government, between 1997 and 2010, a massive 2.61 million homes went up – but only 0.3% were for social housing.
Meanwhile, only 350,000 housing association properties were built – which is where a non-profit organisation owns the property but rents it out to poor people for a more “affordable” price.
Before that, Thatcher’s government built nearly the same amount of properties (2.63 million) and 18.9% was for affordable social housing.
Any council tenant that decides buy the home they live in will look like they’re taking from a small supply of social housing, but what’s the solution? Force the lowest earners in society to forever be indebted to the landlord without having any tangible assets of their own?
Reversing Right to Buy won’t solve the lack of house building, which is the biggest problem.
House building – where’s the incentive?
House building overall has been sliding and dropped to its lowest level since World War II in 2012 due to the repercussions of the global financial crisis.
Unless a home builder is state-owned, it is not obliged to create endless amounts of social housing. They are there to make a profit and if there is no added incentive for them to sell off cheap properties to the government, then they won’t do it. After all, they are private enterprises with wages to pay, material costs to cover and shareholders that gave them enough money in the first place to build properties.
Prime Minister David Cameron promised that over 30 house builders will benefit from the temporary scrapping of costs and levies get get Britain building again.
It seems to be working. The NHBC said in September that house building activity in the UK this year is set to top levels seen in 2014.
However, in the same breath, NHBC highlighted how this doesn’t necessarily mean good news for social housing.
“Despite a slight decrease for August, overall registration levels for the rolling quarter show the same steady growth we’ve seen throughout 2015,” said NHBC Chief Executive Mike Quinton in a statement.
“However, we are now seeing registration volumes fall in the public and affordable sector after a good start to the year. This may be due to many housing associations holding back on developments … We will closely monitor this over the coming months, along with the private sector, as the house building industry strives to build more new, quality homes that the UK needs.”
Out of the homes that are being built, they are not “affordable” for the poorest in society.
British homebuilder Taylor Wimpey said in its half-year results that it completed 5,842 homes (excluding joint ventures) across the UK, with a 9.2% increase in total average selling price to £225,000. Persimmon also said that legal completions increased 7% to 6,855 new homes sold with the average selling price increasing by 4% to £194,378.
“When building more homes isn’t enough”
- Pedro Ribeiro Simões/Flickr
Britain needs to build more affordable houses, as well as for the everyone else, which we’ve already established.
But there are other issues that that soak up what little affordable housing is left. Many people just don’t want to talk about for fear of political backlash but as I wrote about before at length, part of the problem (and a significant one at that) is pensioners.
In September Bob Pannell, an economist at the Council of Mortgage Lenders, wrote an excellent article entitled “When building more homes isn’t enough.”
He highlighted the issue with under-occupancy (emphasis ours):
Demographic changes are simultaneously boosting demand for housing and constricting its supply. It is clearly understood that net migration, increasing life expectancy and the growth in the number of single-person households are all boosting demand. But we also have an aging population that holds a disproportionately large amount of national housing assets. Older people are more likely to under-occupy housing, and to be reluctant – or unable – to move to homes that might better suit their needs.
Both the Financial Conduct Authority and a housing professor from London School of Economics supported this reasoning on two separate occasions.
Basically, pensioners, or as Britain’s regulator calls them “last-time buyers,” are cashing in on record low interest rates and selling off their large homes for a lot more money than they paid for them. In turn, they are buying up a lot of the smaller properties with cash, leaving them mortgage-free.
Of course, this puts pressure on first-time buyers, low earners or council tenants looking to buy their own home because the small residential properties available are going to people who can snap them up quickly without worrying about securing a mortgage.
Britain’s housing shortage can be solved if more homes are built continuously. We all know that this is easier said than done. But if politicians stopped wasting their time and everyone else’s by blaming drop-in-the-ocean schemes like Right to Buy for the crisis, maybe we’d all be further ahead in carving out a better landscape for affordable housing.