Crisis is not too strong a word. The UK housing market is extremely dysfunctional, and has been for a long time. It doesn't really deserve to be called a market, as supply and demand divorced quite some time ago. The roots of this are multifarious and deep, going all the way back to the feudal system. The royal family still own a ridiculous amount of land on this island.
I have a strong interest in housing, and have been made increasingly despondent by the coalition's pronouncements and lack of actual policy on the subject. Fundamentally, the new government does not consider housing to be any kind of priority. I keep an eye on the department responsible for housing, planning and local government, Communities and Local Government (CLG). First of all, the housing minister, Grant Shapps, is not a member of the cabinet, as previously was the case under Labour. Secondly, CLG has shouldered a disproportionate share of thus year's (2010/11) budget cuts - £1.2bn of the £7bn total. It will undoubtedly face much greater cuts in the coming years.
Thirdly, CLG has put out the following ground-breaking press releases in the past month, under the leadership of Eric Pickles MP:
Eric Pickles to stop 'propaganda on the rates' killing off local newspapers
Call to arms in battle against red tape (Critiqued very effectively here )
Councils pledge to raise bar on procurement, which includes this classic:
The National Audit Office found that in some cases there are huge differences in the prices parts of the public sector, including councils, are paying for goods and services. The cost of envelopes varied between £2.04 and £9.13, and paper costs varied across councils from £6.84 to £14.79.
Pickles calls time on town hall quango forcing councils into bin cuts
Bin collection, envelopes, and council newsletters. Does this strike you as a department that has got to grip with the vital areas of policy that it covers: housing, planning, local government, and regeneration? Or does it seem to be adrift, unsure of its purpose, and run by ministers oblivious to the bigger picture?
Here is my attempt at the bigger picture of housing.
There are massive economic, social, environmental & quality of life interdependencies with housing, and shortages thereof.
- Economic.
High housing costs lead to reduced competitiveness, more difficulty in companies attracting new employees, upward pressure on wages, across-the-board inflation, congestion & associated spillover effects, time-wastage due to commuting, reduced labour market flexibility. Lest we forget, the popping of the last house price bubble was enough to throw most of the world into recession. In the more economically successful South of the UK, house prices are now recovering. The areas of lowest supply and highest demand, notably central London & Cambridge, have already exceeded their pre-recession price peak. - Social.
Housing shortages lead to overcrowding, pressure on household budgets, unemployment ghettos, and insecurity of tenure. Housing and poverty are have always been related, and this self-perpetuates. Whereas historically food & energy took up the largest proportion of household outgoings, housing costs have overtaken them. 21% of household income goes on housing costs (median percentage, 2007/8 figures). For private renters this is 30% and mortgagees 29%. This also puts pressure on Local Authorities, who have a duty to house the homeless, and central government, which pays Housing Benefit. - Environmental.
The UK housing stock is hugely energy inefficient. Much of it dates to a time when building standards were minimal or non-existent and 'energy efficiency' was just two words that contain many instances of the letter e. To date, efforts to deal with this have largely focussed on social housing, which has to adhere to much higher quality standards than private. However funding for these refits is drying up with CLG cuts. Weak incentives have also been provided for owner-occupiers, but require benefit receipt and have not been well publicised or widely taken up. Private rental property has been totally ignored, as ever. Beyond energy, most housing can't cope with the weather extremes that climate change will bring. Plenty of it is situated in flood plains and most has poor water efficiency. Standards for new housing are ambitious; zero carbon by 2016, if a decision is made on what that means. But new stock is a tiny percentage of total housing, as we're building so little of it. - Health & quality of life.
Poor quality housing leads to illness. I experienced this a month ago; having a badly bodged shower leaking into your bedroom causes persistent colds, funnily enough. Underplanned communities entrench unhealthy habits, particularly when car travel is assumed and healthy food practically impossible to find (the picturesquely named 'food deserts'). Lack of space & privacy are also terrible for quality of life, as is worry about unaffordable housing costs, be it rent or mortgage, and/or insecurity due to risk of eviction.
A simplified model of how housing gets built in this country would look like this:
Overly complex, incoherent and obfuscating layers of bureaucracy
vs
Oligopoly of entirely profit-motivated human sharks
Land ownership in the UK is highly concentrated and even England isn't particularly urbanised. The majority of non-urban land is protected from housing development and has been for decades, despite hysterical media stories about concreting the countryside. 13% of UK land is green belt, for instance, and the majority still agricultural.
It is very very (very) slow to get planning permission and build housing in the UK. Whilst this has it upsides, as planners take many important factors into account when assessing whether to grant permission, it's also expensive, in money and time. I think it can and should be streamlined, and quality could be increased in the process.
But the slow pace of new housing isn't just red tape, one of the coalition's favourite buzzphrases. I went on a work visit to a new community in the Netherlands a couple of years ago, and discovered that over there they build at twice the rate we do. That's two new houses completed in the time it takes us to build one, consistently. Why? Because in the Netherlands house-builders compete with each other to come up with innovative new building methods and designs. In the UK, construction companies are few, very large and deeply conservative. They still build in much the same style as a century ago. Because its what they're used to, and trying new methods could potentially be expensive and risky, especially in a dodgy market with scarce credit. I don't know whether you've noticed this, but large conservative (note the small c) organisations resist change.
Although that's an overview of the most serious problems as I see them, each tenure - owner-occupied, private rental and social rental - has its own particular issues. I'll go through each in subsequent posts, covering the coalition's policy impact on them so far. CLG has issued the odd housing related pronouncement; unfortunately they've made relatively little sense. I'll start with private rental, which I have the most (bitter) personal experience of.
To conclude, here are some statements of the obvious.
Supply Rise Fails To Cut House Prices. Because the suppliers are setting the prices and huge unmet demand keeping them high.
House Prices Are Recovering in South East Despite Economic Downturn. Because of the lack of supply and pressure of demand.
We Are Building Fewer Houses Than We Need. And this has been the case for decades.
Affordability Is More Than Just A Housing Problem. This document is from the CLG website, produced by a unit that the coalition are scrapping. If you don't click any other links in this post, I recommend reading this. It presents an excellent and succinct snapshot of housing affordability problems right now.
When you consider that CLG is shutting down this area of research, it is pretty clear how much importance the government attaches to housing as a subject.
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