On average, private renters spend about a third of their income on housing, compared with roughly 13% for homeowners.
One of the issues is that a landlord of a privately-rented house typically has a buy-to-let mortgage on that property and it is the tenant who is paying it.
If said tenant has proven they have paid their rent for two years uninterrupted, this should be evidence enough to a lender that they can afford a mortgage on at least the property they have been renting. After all, 13% of their income is the mortgage amount their landlord is paying for the property in which they are living.
Many more statistics will follow, along with our ideas to make the system more balanced.
In many towns across the country right now, there are plans in place for a new housing development of anywhere between 10 and 2000 houses. This is a necessity in 2021 as we see the numbers of renters increasing and the lack of affordable housing reducing.
The issue that is not being addressed is the
One of the reasons for houses being so expensive is the trite ADHIONO of market forces. In other words, if you want to sell your 3 bed semi in London, it is worth X amount. The very same 3 bed semi in Northamptonshire is worth Y amount, and this amount will be substantially less than in London. For the same house, which obviously translates to a cost per square foot. The cost per sq ft in London is three or four times that of the cost per sq ft in Northamptonshire, on every property. Now we can invoke the ‘market forces’ principle. We know that when demand out-strips supply, prices go up.
However, in small towns in Northamptonshire, such as Rushden, where a 2000-house estate is planned and has been on the cards for at least five years, the local supply and demand principles will not see the market forces applied rigoursly enough to impact the buyers’ pockets.
We think that the influx of 2000 homes should realistically, if market forces really did work, reduce the price of every comparable house in the area as supply temporarilly out-strips demand. An average 3 bed semi-detached home in Rushden might be £220,000. With the new estate being planned, and therefore supply increasing exponentially for a short time, the average house price should reduce by half, perhaps, to reflect the abundance of 3 bed semis in the town.
Yet this is seldom the case. Why not? What stops actual market forces from impacting housing prices?
Developers look at the average price of a house in the area and calculate their profit a long way in advance of them even laying the first brick. They know when planning is likely to agree to the build, which houses sell for the largest profit margin according to their portfolio, and how many social houses they must build to comply with county regulations.
This means that 2 years ahead of the build, they know exactly what the estate will look like, and how much money they will give their share holders.
The problem we have with this standard operating procedure by house builders is that the actual build costs of a 3 bed semi-detached house in 2020 on an estate like the one planned for Rushden, after taking into account all the necessary ground work, utilities connectivity and road creation is around £65,000. The house will then sell for £200,000 up to £230,000.
At The NPP, we think there are certain industries that should be exempt from making vast amounts of profit on the backs of average people. These industries would include utility companies such as water and electricity suppliers, bus and train companies as they are the backbone of mobility in the UK, and house builders.
The knock-on effects of the house builders making vast profits is that banks make vast profits when they lend a home buyer the huge sum of money over 25 years to buy said property.
This argument will be expanded as we develop a better understanding of the principles at play. Please keep coming back to see how it grows.