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.
Britain has Fallen OUT of Love with its Housing Market
When Nigel Lawson described the NHS as “the closest thing the English people have to a religion”, his party was in the process of substituting it with another: the housing market. Policy changes such as tax incentives, the right to buy and the deregulation of the private rental market had formed the basis of Thatcher’s goal for a “property-owning democracy”, and for decades the narrative has held that rising house prices translate into general wealth.
Polling released yesterday (31 March) indicates that the British public no longer believe this story. Confronted by low levels of home ownership and an affordability crisis, the British public would now prefer house price growth to remain low or to stop entirely, and homeowners are in favour of bold reforms to make housing more affordable at the expense of their own properties increasing in price.
The polling, carried out by YouGov on behalf of the research and campaign group Positive Money, found that more than half (54 per cent) of British homeowners would be happy if their own home did not rise in value in the next ten years, if that meant houses were more affordable for those who don’t own property. Since 2000, average wages have grown by 94 per cent while house prices have grown by 224 per cent.
“I think people realise that the system is broken when you can’t really own a home just from having a job,” said Danisha Kazi, senior economist at Positive Money. “Soaring house prices are locking the younger generation out of home ownership. Most people that own homes are older, they’ve got children or grandchildren and they recognise there isn’t an easy way to get them on the ladder other than for them to give them equity that they have in their own housing.
“At the same time, many homeowners are also banking on their own house paying for their retirement or care — the costs of which are also rising — and many are not wealthy enough to pass housing wealth on to their children.”
The realisation that rising house prices do not create prosperity even for wealthier homeowners means that support for reform comes from a broad range of demographics. A majority of Conservative voters would be happy if their home didn’t rise in value if it meant others could buy, and would support the Bank of England being given a target to keep house price inflation low and stable. Similarly, 44 per cent of Conservative voters (and 51 per cent overall) would support a rise in council tax for owners of homes above the national average house price, and a decrease for those with homes that are lower.
The poll found that older voters were actually more prepared than any other age group to sacrifice rising value on their homes in favour of affordability, perhaps because they are less exposed to the risk of falling prices, having built up more equity. The Conservatives had a 62 per cent share of the over-60 vote in the 2019 general election.
The report also counters the common assumption that the housing crisis is primarily the result of a shortage of homes. It reveals that new supply has in fact exceeded the formation of new households in recent decades. In 2020 there were 7.5 per cent more dwellings than households in London and 4.8 per cent more in the south-east.
Home ownership in England peaked at 71 per cent in 2003, and has since fallen to 65 per cent. For young adults it has fallen more sharply, to 47 per cent, while home ownership among ethnic minorities is lower still, at 35 per cent.
High rents and the change in working patterns caused by the pandemic have exacerbated the problem: 42 per cent of private renters say that the pandemic has made home ownership a more important aspiration for them, while 68 per cent of all renters don’t believe they will ever be able to afford a home of their own, according to Ipsos Mori polling.
Years of policies such as help to buy, changes to stamp duty, the shared ownership scheme and extended mortgage terms have only served to financialise Britain’s housing market, a problem most voters now apparently recognise: a large majority believes that the purpose of a house “should be mainly a home, not a financial asset”.
While the UK’s housing affordability crisis is particularly severe, rapidly changing attitudes on housing have already proved electorally significant in Sweden, where rent control policy led to a government crisis; in Ireland, where housing has been a key issue in the resurgence of Sinn Fein; and in Canada and New Zealand, where governments have taxed or restricted foreign buyers. British voters, too, seem hungry for new ideas.
What are your thoughts on this? The information here was taken from this article.