The housing crisis could become a disaster. Time for intervention
We are currently suffering a housing crisis that is slowly but steadily turning into a disaster. An increasingly large majority of people in Britain are experiencing worsening housing circumstances and what little wealth we have is shrinking as housing costs are needlessly escalating.
The truth is, housing does not cost what we are paying for it. Rents are often higher than mortgages and yet many landlords do not spend these rents maintaining our homes. Property costs do not reflect building costs, especially in the south of England. Such high house prices mean mortgages are enormous, even if low interest rates try to fool us otherwise. Mortgage loans still have to be paid back and a huge amount of money borrowed at low rates of interest, results in just as much profit for the bank as smaller debt at higher interest rates.
Analysis conducted a year ago into the affordability of housing is already out of date. For most people, actual household income is falling and housing costs are rising. Last year, house and flat prices in London rose by more than £30,000 – a figure higher than most working Londoners’ annual salaries. However, in January 2014, the government suggested that average incomes had increased, deliberately ignoring cuts to in-work benefits and the huge tax cut to people earning over £150,000.
Therefore, it is unsurprising that most people in Britain cannot expect to be able to afford to buy an averagely priced property unless there are large price falls or many years of wage rises above housing inflation.
In the 1990s less than a million households were waiting to be housed by the council. By 2008, this figure had reached some 1.8 million and now the count is rising above two million. One household has been on that list for 57 years. In the UK, an estimated 600,000 people are officially registered homeless, while at least 240,000 people have had to rely on squatting in one form or another to avoid becoming street homeless.
All this while leading politicians in the UK have increased their personal property portfolios and promised “there will be no mansion tax” (Cameron says it is not negotiable in any future coalition agreement). Politicians frequently claim that they are not sure how many properties they personally own, or have a stake in, how many tenants pay them rent and how much money they have personally made out of the London property market which their policies help to sustain. In 2009, while Leader of the Opposition, the current Prime Minster said:
‘Please don’t make me sound like a prat for not knowing how many houses I’ve got.’
David Cameron, 2009
These same politicians who have made a fortune from property are planning to prevent under 25s from even having access to housing benefit in future.
Such extremes show how our housing market is fueling inequality. The richest tenth of children, by household, in Britain, are growing up in families with well over one hundred times as much wealth as the poorest tenth.
At this rate, we are set to return to a pre-war housing market. While the majority of us feel the pinch, it is boom-time for certain landlords who are buying whole streets worth of housing for profit. In January 2014, the Financial Times released analysis showing that in the last five years, the equity of mortgage holders in Britain had fallen by £169 billion, while that of landlords had risen by a massive £245 billion . Only a minority of landlords will have secured the bulk of this gain; and they do so at great cost to millions of others – by buying more property with the profit from the inflated rents they charge their tenants.
But there is a safety net. Legislation is already in place in Britain that allows these mortgagees to stay in their homes and become tenants to avoid eviction. It isn’t used much and needs adapting, but it exists. There are also plans within some political parties to increase tenants’ rights. However, others seek to reduce their rights, increase evictions, reintroduce mass private renting and let the rich get even richer.
Although house building is at an historic low, the actual supply of dwellings per family and rooms per person has never been higher. This is because over the last decade, millions of extensions have been added to private-sector properties. The recent shifts in who owns this property, now mean that large-scale private landlords dominate the market. It really is a battle that the minority at the top appears to be winning – for now.
The reality is this country already has sufficient housing. In some areas, building more could help, but not if we continue along our current trajectory. More and more homes will become second homes, empty investment homes, or will be used by just one or two very affluent professionals when, in the past, a family would have lived in that home. But with intervention, we can ensure that supply meets demand.
A tiny number of people are benefitting greatly from austerity Britain and an even smaller number are enriching themselves beyond our wildest dreams at the majority’s housing expense. But there are alternatives. We cannot allow the housing crisis to turn into a disaster.