Youthful high spirits

As a distraction from the scary labour market, I've been considering the housing market prospects for me and the rest of today's youth. This is akin to distracting yourself from an earthquake by setting off a small nuclear bomb.

I recently came across an article in the Independent's money section about a young woman called Eloise wanting to buy her own home. Eloise earns £22,350 and has savings of £1,000. She would like to buy a two bedroom flat in London, or maybe Bristol, and wants her financial decisions to be ethical, although I'm not quite sure what that means in this context.

I'm sorry Eloise, but I read this article and burst out laughing. SERIOUSLY? You really think that on those wages and with such paltry savings that you can afford to buy so much as a shed? Wake up and smell the coffee. In Cambridge, which is cheaper than London, I would need to earn £40,000 and have a £50,000 deposit in order to buy a two bedroom flat.

My generation, the twentisomethings renting at the moment and thinking it might be nice to buy one day - we are screwed.

We rent poor quality homes at at high cost, and are treated badly by rental agents and landlords because they can. They will continue to do so, and rents will rise with demand.

We struggle to save for the 25% deposits needed to buy a home. Low interest rates erode the value of our ISAs and our jobs look insecure, if we're lucky enough to find and keep one. Rates are expected to stay low for the next two years.

We attempt to repay our student loans, whilst glowering at our parents who got their degrees with no fees and generous grants. The interest rates of these loans are going up to 4.4% in September from the current 0%, and that's before the student loan company is privatised (as announced in the June budget).

We can't get social housing, because there isn't enough to go around and established families get precedence, reasonably enough. Funding for building more has been slashed and burned, and targets torn up.

We can't get mortgages, as we're seen as too much of a credit risk and don't have vast deposits. Introducing caps on mortgages has been suggested and returning to the era of easy mortgages would be highly unwise, given that unwise lending caused the downturn in the first place.

We can't find housing that fits our needs, because developers are building tiny rabbit hutch flats to store us in, and we're priced out of the few decent-sized houses that exist. UK new builds are the smallest Europe, reports the Commission for Achitecture and the Built Environment. Even the Daily Fail says so!

We simply can't afford to buy, as the gap between wages and property prices continues to gape wider and wider and youth unemployment rises inexorably.

I am not particularly happy about this, and doubt that anyone else in my demographic group is thrilled either. I certainly don't consider myself entitled to own a palace at the age of 25, but do think it reasonable to have a well-maintained home that I can feel secure in for more than six months.

The likely result of the coalition's so-called housing policy is this: the house price bubble will return in South, pushing up rents further. This is at a time when housing benefit has been capped and other benefits decoupled from housing cost inflation. Homelessness will increase. Mortgage availability, especially for first time buyers, is not about to get better. Employment prospects are poor and taxes rising. Last year, 75% of new housing starts had some form of government subsidy. Despite this, very low number of houses were actually delivered. With this support severely cut, the number of new houses built is already falling and will fall further. So prices will continue to rise, supply will continue to lag, ad nauseam, until the whole East of England falls into the sea in 2054.

Things aren't completely hopeless, though. Here are my suggestions for improving the state of the housing market.

1. If the coalition aren't going to have a housing policy, they should get rid of the post of Housing Minister. This accords with their drive to get rid of bureaucratic non-jobs.
   
   
2. Tenancy law needs to be reformed to make private rental more humane. Look how Germany and much of the rest of continental Europe manage it: longer tenancies, more rights for tenants to match their responsibilities, less of an assumption that home ownership must always take precedence. Implementing the recommendations of the Rugg Review would be a start.
   
   
3. Second homes & buy-to-let should be penalised through the tax system, rather than supported. This may seem unfair to those just trying to invest for their retirement and so forth, but I believe it is necessary. It surely isn't justifiable to have millions of homes standing empty, when so many people are homeless, overcrowded, or housed unsafely.
   
   
4. The planning system is in need of reform, as it cannot achieve what it needs to in the 21st century. However, reform needs to happen in a measured way with full consultation with actual planners, rather than abolishing bits at random and expecting Local Authorities to keep calm and bugger on somehow. (There will doubtless be a future post on planning and its current state of chaos.)
   
   
5. The government needs to investigate and regulate oligopolistic behaviour in big developers and house-builders, including land-banking, with the aim of introducing a bit more competition into this sector. Other countries manage to build more and quicker, in part thanks to a much more dynamic and competitive building sector.
   
   
6. It would be helpful to streamline compulsory purchase powers, which assist Local Authorities in building their own social housing by letting them grab unused land. The major cost of social development is the land, as the public sector is priced out by developers who can realistically expect 25%+ profit margins.
   
   
7. The UK needs a culture change from the tired old adversarial planning system. I'm sure that more competition in the building sector would help with this. We might then be able to follow the Netherlands' good example and try public & private sector joint ventures to build new homes.
   
   
8. Everyone needs to think differently about housing. A roof over your head is a right first and foremost, and an investment second. Likewise, we should stop thinking of a home as synonymous with ownership. If private rental was reformed and social housing more widely available, views should evolve accordingly.
   
   
9. The planning system should make room for different kinds of homes as well as different tenures - canal boats, caravans, yurts, treehouses, old train carriages, hobbit holes, etc. Not everyone wants to live in a brick box, and it certainly isn't positive for the environment to force everyone to do so.
   

My current preference is for a yurt, after staying in one for a weekend's holiday. It would certainly cost quite a bit less than that elusive two bedroom flat.