Housing affordability: government announcements and other reports and policy papers: November 2018

CIH report ‘Dreams and reality: Government finance, taxation and the private housing market’.

The report highlights how housing policy has become more reliant upon market provision and how the market itself has become increasingly controlled and influenced by government. This has consequences for house prices, rents and affordability. Governments across the UK are providing direct support of the order of £37bn over the five years to 2020/21 for homeownership and private renting, through a combination of loans, grants and guarantees – around £8bn pa (excluding tax arrangements, which strongly favour homeowners). Less than a third of that funding is outright grant. Over half of government support is specific to homeownership, and two-fifths is to more broadly support private sector housing supply.

The report concludes that: in terms of comparisons between tenures, owners are net beneficiaries of government support compared with tenants, and social housing tenants benefit more than private tenants; affordability constraints on homeownership (outside London) are often exaggerated; deposit requirements remain a major constraint, notwithstanding Help to Buy, SDLT reforms etc; government has now made a significant investment in the private housing market and as a result is exposed to substantial house-price risk; in the long term, the PRS’s continuing growth will impose a significant burden on government in the form of housing benefit costs for an increasing number of retired households that rent privately; there is a strong case for fundamental tax reforms to more directly relate them to property values and capital gains, along the lines advocated by the Mirrlees Review.

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Savills’ ‘Investing tot solve the housing crisis’

This report argues that Nearly 100,000 households are in need of sub-market housing each year. The incomes of these households, and therefore the housing they can afford, vary hugely. Housing policy should therefore allow tenure flexibility to reflect local housing needs and ensure value for money from grant. Against this need Savills shows we have delivered an average of 45,000 sub-market homes annually since 2013 (93% of the shortfall is in London and the South, whilst affordable delivery gets close to meeting need in the North and Midlands. It would take £7bn pa to provide social rented homes to all of those in need of sub-market housing. In the most expensive parts of the country this could offer a significant benefit saving compared to housing these households in the PRS. Instead of just aiming to build the maximum number of homes, funding packages should give housing associations the opportunity to tackle local housing issues. This may be addressing housing quality in areas where affordability is less of a constraint.

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Centre for Cities ‘affordable cities’

This research shows a mixed picture in regard to new supply in expensive cities. While places like Cambridge, Reading, Slough, Milton Keynes, Luton and York are building more housing, others like Oxford, Brighton and Bournemouth are building very little.  Centre for Cities latest survey of city leaders puts affordable housing at the top of the list of key priorities.

The Raynsford Review of Planning by the TCPA

This warns that planning has been reduced to a ‘chaotic patchwork’ of responsibilities which disallows communities from benefiting fully from the uplift of values created by development. The report show that people no longer perceive councils as able to protect the public interest, with the economic gain of landowners and developers taking precedent over all else. The report calls on the government to redistribute capital gains tax and stamp duty and restrict permitted development.

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Latest affordable homes data (MHCLG)

Provisional figures show an increase in all affordable homes increasing since 2015-16 but below the average since 2010.  Social rent records the largest decline, followed by Affordable Home ownership.  Click here to view  

Affordable Rent data (MHCLG)

Since 2013/14 affordable rent has become the most common tenure type for affordable homes delivery. In 2017/18, there were 26,838 new affordable rent homes, representing 57% of all new affordable homes. 47% of all affordable homes delivered in 2017-18 were funded through S106 (compared with 22% in 2014/15).

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Social Housing sales (MHCLG)

There were 20,891 sales of social housing dwellings (0.5% if social rented stock)in 2017/18, down 10% on previous year but well above the 8,061 sales before the introduction of increased RTB discounts in 2012.  Social housing sales averaged approximately 97,000 pa during the 1980’s. 

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Latest Help to Buy data (MHCLG)

The equity loan scheme covered 184K homes at a total value of £9.9bn between April 2013-June 2018 (81% were FTBs). The maximum equity loan was increased from 20% in 2016 to 30% in June 201. The mean purchase price of a property bought under the scheme was £252,888.

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IFS report on ‘The cost of housing for low income renters’

This report shows that even the cheapest local homes are out of reach for 40% young adults.  As long as they had a 10% deposit, in 1996 over 90% of 25- to 34-year-olds would have been able to purchase a house in their area if they borrowed 4½ times their salary (the maximum that most lenders will now allow). By 2016, that proportion had fallen substantially. Even with a 10% deposit, only around 60% of young adults would have been able to borrow enough to buy even one of the cheapest homes in their area. Barriers to homeownership are particularly high in London where – even with a 10% deposit – only one-in-three young adults could borrow enough to purchase one of the cheapest homes in their local area. Back in 1996, if they had borrowed 4½ times their salary, 90% of young adults in London could have done so. 

Other key findings include: after adjusting for inflation, average house prices in England have risen by 173% since 1997, compared with increases in young adults’ real incomes of only 19%. Largely as a result, the share of 25- to 34-year-olds who own their own home fell from 55% to 35% between 1997 and 2017. The really big increases in house prices happened before the financial crisis. It is only in London, the South East and East of England that average real house prices are above their pre-crisis level. For these regions, real house prices grew by 30%, 8% and 10% respectively between 2007 and 2017.  House prices differ a lot more around the country than do young adults’ incomes. This makes it much harder for young adults in London to buy than it is for those in other parts of England. In London, 95% of young adults would need to save at least six months’ income for a 10% deposit on an average-priced home in their area. This compares with just over half in Yorkshire and the North East. 

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BBC rent affordability map

According to BBC research, people in their 20s who want to rent a place for themselves face having to pay out an "unaffordable" amount in two-thirds of Britain. They face financial strain as average rents for a one-bedroom home eat up more than 30% of their typical salary in 65% of British postcode areas. A salary of £51,200 is needed to "afford" to rent a one-bed London home and a gross annual income of £24,800 would be needed for the average one-bedroom rental flat in England to become affordable under the 30% measure. The BBC also quotes ONS data that young people are losing the savings habit - with 53% of 22 to 29-year-olds living with no savings at all (up from 41% in 2008) and of those with savings 4 in ten have only £1K saved.

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Southern Policy centre’s report, Housing costs and the central south’s economy’

This reviews the rising housing costs in the region and how it impacts on business. It reveals a growing concern among the business community over how unaffordable housing is negatively affecting recruitment.

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Stepchange Debt Charity report ‘Locked out: how problem debt affects people’s housing situation’

This report documents how the lack of affordable housing impacts on health and well being, how poor credit ratings limit access to affordable housing and how problem debt forces people into expensive private rentals. The report concludes that “it is the lack of affordable housing that has a negative impact on the greatest proportion of our clients”.

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‘Why can’t you afford a home’, by Josh Ryan Collins

The author is a critique of housing unaffordability in OECD countries, including an analysis of the links between affordable housing, land pricing and mortgage-debt/bank lending in the UK.  The book documents the financialisaton of housing and argues that the positive feedback cycle between finance and house prices has created “new spatial and demographic cleavages in society”.   He calls for a new narrative focused on affordability and  gradual, managed house price deflation.