Sunday, 26 August 2012

housing in crisis

Last week there was much debate on housing issues, largely bought about by leading think tank Policy Exchange presenting their idea that councils should sell off their high value housing stock when it becomes vacant in order to build more social housing. You can see a clip on the BBC News site here & follow the link underneath for more information. Now, given that 350,000 families are on the social housing waiting list in London alone, it seems at face value to be a sensible idea. However, many people see this as setting a dangerous precedent. Councils have been known to forcibly re home their tenants, so what's to stop them doing that to get their high value property out on the market faster? It also throws up many more social and economic issues. The main problem that many left wing and green politicians have argued, is one of 'ghettoisation'. Having watched and read a lot of reports on the issues over housing this past week I got to thinking about both the Policy Exchange proposal and the other problems the housing market is facing. So here's my take on it all:

Image Source: (c) Blech on Flickr adapted under Creative Commons license

1. Ghettoisation
People being moved out of high value areas, will leave only the very rich, while the poorer will be moved to high density new homes far out of the city, leading to rich and poor 'ghettos'. If you take this to it's logical conclusion, the whole of inner London will become the domain of the rich, while the less well off will be living on the outskirts and forced to pay more and to commute for longer to get to work in the city. As prices in the centre rise, well off home owners are forced to move further out when they want to buy again, making once affordable areas more expensive and so people in those areas in turn have to move further out like a ripple effect. Key workers such as nurses and teachers may still be catered for, but what about the cleaners, sales assistants, interns, waiting staff and thousands of others it takes to make the city run?

2. Quality AND quantity
One of the dangers of using cash from selling off high value (and high quality) housing is the quality of the new housing that cash funds. Councils and city planners have a dubious history on this issue, look at what happened in the 60s and 70s where tenants were forcibly moved from solidly build houses in areas with strong community ties, to cheaply built mass housing miles away. 20 years on those blocks and estates were falling apart both physically and socially. It seems no one can agree on how many houses would need to be built per year to cope with the current housing shortage but one thing is for sure, there's no point in building cheap housing that isn't going to last. Both economically and socially it's just not viable and the government needs to recognize the mistakes of the past and ensure they are not repeated.

3. Private landlords
Rent in may areas is rising faster than inflation and faster than local wages forcing people to move, often to areas further away from their workplace, families and the schools their children attend. The lack of available housing and the recently proposed cap on housing benefit means many landlords can, and do chose to exclude large numbers of people receiving benefits from renting from them. In the current economic climate, where getting a mortgage is difficult, more people are forced to rent and as the market becomes over-saturated, landlords can get away with putting rents up to unreasonable levels. With property portfolios getting bigger, large amounts of housing stock is now in the hands of private landlords who only answer to market forces. There's a desperate need for new legislation in this area, and raising taxes on buy-to-let profits isn't the answer. What's the point in the government getting more income from private landlords if the issues in this large area of the housing market are not addressed? Higher taxation doesn't make housing more affordable for the people who need to live in it after all.

4. Homeowners
Due to the current economic situation and banking crisis, many home owners are stuck. First time buyers of a few years ago are now in zero or negative equity situations causing a bottle neck in the housing market. Those who can save a deposit for a first home, are finding that there are less properties on the market as the last crop of first time buyers are forced to stay put. In addition owners on the next rung of the ladder have no one waiting to buy their houses and so they can't move either. And the irony in all this? It's CHEAPER to own than to rent, if you have the deposit saved of course. Yet saving for a deposit is becoming more and more difficult so those renting stay renting and those in social housing find it harder to event think about being able to change their situation.

5. Leasehold issues
A recent Chanel 4 Dispatches programme highlighted the problems facing leasehold owners as their service charges go through the roof. It's so bad that even if you live in a block where your council is your freeholder, it doesn't mean you'll be any better off with any people who became homeowners through the right to buy scheme are now finding their situations untenable. I've heard of people who cannot sell their homes because the service charges are so high, no one wants to buy and estate agents have balked at taking properties on because they know they won't be able to sell them. The most worrying thing about this trend, is that the largest number of new homes being built right now, in London at least, will all be leasehold. So while it's a good thing that more housing is being built, at what cost to future owners?

6. The myth of the million pound council house
Many soundbites from the general public recently have focused on the injustice of council tenants living in 'million pound council houses'. Except, that council house has already been paid for, years before property prices raised it's value to that point. It didn't cost the council millions to get that property. I think councils have a responsibility to house those in need in the right areas, relative to the needs of the people being housed. If a family work in an area, have children already at school in an area, why should they be uprooted to a 'cheaper' area if the council has property of the right size available?

7. Housing future generations
As if the current crisis isn't enough, what of the millions of young people who are, or about to be, of the age when they would normally leave home? Children are living with parents longer as housing becomes more and more expensive and even private renting is out of reach for many. Those who can afford to rent privately, often can't afford to save for deposits as well, leaving them with limited options for the future. Only those who land extremely well paid jobs or who have parental assistance can afford to get on the housing ladder now. The problem is about to get particularity acute to the under 25s, who under new proposals by the government would have housing benefit cut, even if they are working but on low wages. Read some of the comments from people like Shelter, The New Statesman and other think tanks on that article, David Cameron's plan seems inadequately thought out.

8. Affordable Schemes
There are now a number of initiatives to help people get on the property ladder. Part buy part rent schemes are becoming more common and there's also a scheme whereby rent is capped, allowing tenants to save the rest for a deposit to buy. However, these schemes are often oversubscribed and part-buy part rent options still require some deposit and there are legal fees involved, so savings and/or parental assistance is still required. The other problem with these schemes is that, as far as I can see, they are only available on new builds. If living in a large new block isn't your thing, or there are no schemes in the area you want to live or work, your options are limited further. This is at odds with recent reports of a huge discrepancies between market values of new and old housing. New properties can fetch up to 50% more than their older equivalent in the same area. Oddly this seems to buck the current trend in other areas for all things vintage, but also sets a dangerous precedent for the future of older properties in terms of maintenance. The other issue I can foresee with these shemes, is that they will all be leasehold properties surely, which may be fine for now, but what about future service charges when these buildings age and need more maintenance?

9. On the brink
I keep hearing in news reports that Britain and London especially is 'on the brink' of a housing crisis. On the contrary, all evidence points to the fact that we are in the middle of this crisis NOW and it's only going to get worse unless radical action is taken NOW.

10. Houses vs properties
In my view, this all boils down to one central problem. In this country we see houses as property, as cash generators and investments. Housing should be about creating homes, places people want to live in areas they want to stay in for successive generations. Hosing should be about homes, not property. As homelessness is on the rise, now is not the time to be making cuts ANYWHERE in housing. The situation has become so dire now that only government intervention can help. Until the government does something to reinforce houses as homes first, the negative cycle will continue. To some extent, basic human requirements like housing and food need to be immune to, or exempt from market forces. They are just too important. This may seem incredibly simplistic and I'm no economist, but I think what is lacking most, is a great deal of common sense.

So what's to be done? The housing crisis is so tied to the economic climate and the banking crisis that it's hard to see a way out. Selling off high value council houses though, certainly isn't going to solve it.

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