Housing is moving up the agenda -– and looks like being a key issue in next year’s London elections. The Greater London Authority now has more powers over housing and given London is still dogged by a lack of affordable homes to rent, lease or buy, despite the recession, it’s reasonable for Londoners to expect the next Mayor and Assembly to take action.
Building more homes in a time of public sector cuts will be a challenge, and even using what we’ve got more efficiently will take a lot of cash. So we will need a range of ideas if we’re going to offer a credible way to increase the capital’s affordable housing.
1) Unused private properties
The first place to look of course, is at empty unused private properties. According to the Empty Homes Agency there are 70,000 empty homes in private ownership across London. The legislation is already there to give local authorities the sticks and carrots they need to get private owners to bring them back into use at minimal cost to the tax-payer.
The problem is that few local authorities use what’s available or are not using their scarce funds efficiently. Many councils, for example, offer grants to owners of empty properties to enable them to renovate the properties to sell or let out.
Yet because councils are acting alone and give grants not loans, the impact is low compared to the potential. London should learn from Kent, where a number of district councils came together, to pool their resources and offer low interest/no interest loans to finance the renovation of empty private properties. If the GLA could help London Boroughs to form consortia –- or better still, to fund special purpose social enterprises -– perhaps we could make a real impact on those 70,000 unused homes.
2) Social enterprise special vehicles
The second place to look is the 5,000 empty council properties across London. With the fall in property prices it no longer makes financial sense for a council to sell properties to finance the renovation of other properties, so Boroughs don’t have the money to renovate some of their empty homes.
Yet they could think a little more imaginatively.
My idea is that they should be ready to transfer any empty properties they can’t afford to repair to housing associations or social enterprises on relatively short leases –- say 7 years. Let’s see if this sector could rise to the challenge of repairing and letting out such properties over a relatively short payback period. I suspect they would.
3) Medium-term lease transfers
A third idea is found in the Localism Bill currently going through Parliament (though it needs serious re-design). The Bill’s big housing idea is to tackle the inefficient use of public housing, when social tenants live in properties too big for their needs. According to research supporting the Bill, 400,000 households in social housing ‘under-occupy’ their properties by at least 2 rooms, despite the various incentive schemes encouraging tenants to downsize.
The Bill’s solution is to offer fixed term tenancies with a reassessment of the tenant’s needs at the end of the tenancy. If the tenant is no long deemed to be in need no further tenancy will be granted and the tenant will have to leave the accommodation. This approach has been criticised for, among other things, creating disincentives to work and breaking up communities.
4) Tenant Benefit Bond
An alternative could be for tenants earning over a set amount to pay the full market rent. The additional rent -– the difference between the market and social rent — would be put into an account: let’s call it the Tenant Benefit Bond. This money would be available to the tenant in only one circumstance: if they chose to move out of social housing, and needed money for a deposit on a property they wished to buy. For me, this is a socially sustainable version of the ‘right to buy’: it helps people move out of social housing, but leaves their property for another family.
The Tenant Benefit Bond has another advantage. While the tenant remains in the council property, paying a market rent, the money going into the Bond could itself be a source of capital for the council or housing association to build more properties.
Unlike Eric Pickles’ scheme, the tenant would have an increased incentive to work knowing the extra money is being set aside for him. The landlord would have an incentive to implement the scheme because it would give them more spending money. Central government is only under-writing the scheme rather than spending the money to build the houses. Everyone’s a winner.
Conclusion
The days of being able to pay to build Britain out of the housing crisis we face have gone. We need a portfolio of ways to tackle the housing crisis on both the supply and demand sides. For London, empty homes consortia, social enterprise special vehicles, medium-term lease transfers, and a Tenant Benefit Bond might, together, hold part of the answer.
* Emily Davey is a housing Solicitor. She started in Legal Aid and now works for social landlords. She trains both landlords and tenant representatives. She fought Dorset North for the Lib Dems at the last three general elections.
Follow @LibDemVoice on Twitter
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
Now 19 Leicester Labour councillors are told they can't stand again in May by the national party
It's parliament that's on trial.
My tweets
Teddy safe and sound
Weekly Road Report - West End Ward #dundeewestend
Martin Gray
Martin
David Raw
George Thomas
24 Comments
“The days of being able to pay to build Britain out of the housing crisis we face have gone.”
But we can come up with billions of QE. Why not spend it on building houses, instead of effectively letting the bankers trouser it?
It doesn’t look like any of your suggestions will work particularly well or make much difference. Maybe that’s what you want.
It doesn’t mention that Emily is 7th on the London Assembly list (possibly 6th now Jeremy Ambache has left the party?) so should we assume this article is her own view and not party policy as I was under the impression that London Lib Dems were in favour of building more housing in the capital?
The first and second ideas seem fair enough, Emily seems dismissive of the third option which makes you wonder why she included it, and the fourth just doesn’t seem feasible given the discount given on buying your council property compared to the deposit and other costs required to buy a home privately.
Just tax the hell out of empty properties until rents drop or places are sold. I’ve lived in a rented flat next to an empty property, there were problems with the fabric of the building, rats, pigeons etc. More than 10 years the owner has possession of the property and left it empty. The same goes for commercial properties. If owners couldn’t afford to keep properties empty, rents and costs would fall for everyone, lower costs for businesses, boost to the economy.
Emily, you are quite right to say that housing has moved up the political agenda, especially in London, where it has been estimated that someone on average income would need to be in their 50s to be able to afford to buy an average-priced home if they didn’t have any help from a family member, what with current deposit requirements.
But you are quite wrong to suggest that a programme of state funded housing is not part of the answer. It may not accord with the bonkers far right ideology of our coalition bedfellows, but actually the ONLY way we are going to meet the massive housing need in the south of England is by the state financing a massive programme of housebuilding. At no time since 1945 has the private sector ever built enough homes to meet housing need – it has only been the public sector ‘top up’ of housing completions that we have ever sufficiently housed people in the UK.
Let’s put to one side the massive economic multiplier effect from building housing that would add at least £2 (some estimates suggest £3.5) to GDP for every £1 spent on building new homes; let’s put to one side the fact that even the ‘dry’ David Laws in his short cabinet career reconised the value of construction to the economy when he allocated £500m to projects that included housing to aid economic recovery; let’s put to one side the fact that decently housing people is the right moral thing to do; and let’s put to one side the massive social need (and therefore cost) we would be alleviating by building new homes, and let’s note that it would be enormously popular and might start winning back a few of those decent left-of-centre people that have fled us in the last year, which has meant that the only progressive thing about the libdems is our progressive downward trajectory in polls, membership, income and activism.
We would be enhancing, not jeoparidising, our economic recovery by building new homes, and our credit rating would not suffer if the markets saw that it was borrowing to invest, and certainly will not object when we start getting higher growth figures and more tax revenue from a construction investment plan.
Will Cleggy back this?
Quite interesting, but I would point out some obvious things:
1)
Why do you feel that providing a loan will have a greater impact than a grant? I would guess that it is more likely that a lot of owners are not aware of the grants so they don’t take advantage of them. It’s not much use putting any system in place unless you make people aware of what is available.
You’ve mentioned the system adopted by councils in Kent but you’ve made no mention of the impact their system has had, how did it help?
2)
Would a housing association be willing to incur high costs of repair for such a short (7 year) lease time? If you’re going to go down this route why not just transfer all stock to housing associations?
4)
I think my observation would be why provide this sort of bond? If an occupant can afford market rent, why not just charge them that? We have graduated income tax (which is considered fair), why not have graduated rent based on income. That would mean some one existing on state pension pays a bare minimum and some one with good income pays full market rate. People who can then afford it (and probably don’t need social housing anyway) may be tempted to go to the private market.
I think a council run benefit bond would be very problematic and probably expensive to run.
Thank you for your comments. Chris sh can I come back to you on the points you raise.
1. You ask why loans not grants for private owners of empty properties. At the moment councils have very limited money to give to private owners to renovate their properties. With cuts in councils budgets it is unlikely that many councils will be giving private owners more money. To make the money go further you could replace the grants with loans enforceable after a couple of years. So the private owner has to either renovate and sell or let but not renovate and leave it empty.
2. You mention Housing Associations taking on the empty council properties in disrepair and stock transfer. Stock transfer requires tenants voting for transfer and not all tenants want to be managed by a housing association. Stock transfer also puts the property permenantly out of reach of the council which it may not want. Housing Associations may not want short leases on properties because they are not mortgageable.
3. Just upping the rent on tenants as their income increases is not a great motivator for work it is rather like as second tax only payable by social tenants. As a legal aid solicitor I had clients who could not afford to get promotion and in some cases get a job because they would lose their benefits. The tenant bond would mean that there would still be something in it for tenants if they took the promotion.
The other comments assume I dont support building social housing I do but finance in this area is limited. With the property slump the potential for cross financing has reduced so it is more difficult to make the limited money go further. Relying on or waiting for large sums of money to come into the sector is just narrowing our options at a very difficult time.
Alistair
there is legislation for councils to take over the management of properties that have been empty for more than 6 months but it is not used by councils as much as it might be and the Eric Pickles is not keen on the legislation. In the same Act Housing Act 2004 there is something called the Housing Health and Safety Rating system which affects all residential properties other than council properties. If you are faced with the same problem again phone up your council environmental health and ask them to come round and do an inspection. If they think there is a hazard in the property ie rats they will contact the owner and ask them to sort it out if they don’t they can land up in the magistrates court with very hefty fines and or the council going in an doing the work and recharging the private owner. The option of doing nothing is no longer available.
Anna
In response to your comments. The third option is not an option I have suggested it is what will happen when the Localism bill comes into force. Housing Associations and Councils will be able to choose to give social tenant fixed term tenancies if at the end of the fixed term the tenants cease to be in “need” the tenancy will be terminated and the tenants evicted.
The odd thing is about the bill is that the fixed term tenant can put in for the right to buy or right to acquire. So if the tenant moves in and does really well and can afford to buy they can do so at a discount. But if they do averagely well and can’t afford to buy they will be evicted. If they don’t do so well they will stay put. The tenant bond option keeps the incentive to work and reduces the eviction level.
Hi Emily,
thankd for your responses and rassurances that you are a supporter of more state-funded housebuilding. While i agree with you that it is unlikely to be at the top of Tory priorities and solutions, that is exactly why you, as a fellow libdem, need to be shouting from the rooftops about the need to do it . We are the good guys – just – in the coalition, and we should use that position of power and influence to advocate our beliefs at every opportunity. Nothing else apart from massive new housebuilding programmes funded by the state will do more than make small dents in the affordability crisis.
That said, here are some thoughts on your four options:
1. Empty Homes – 70,000 sounds like a lot, but London already has the lowest proportion of empty homes since the 1970s. Many of them are in posh boroughs with wealthy foreign owners – good luck either a) convincing conservative authorities to pursue those Arab/Russian//whatever millionaires or b) getting local authorities to fund the expensive lawyers that will be required to wring those empty homes out of their rich owners’ hands. Many of the other empty properties are the subject of long and protracted legal disputes, and aren’t that easy to get hold of.
Whilst every effort should be taken to get hold of them, the numbers involved are not really worth much effort compared to other forms of delivery.
2. Where to start with this one! For one, property prices in much of London have not fallen. Secondly, most of the ‘5000’ are between tenancies or are part of estate regen schemes, and are not ’empty’ or available in the sense you infer. Thirdly, devolution of the Housing Revenue Account next April makes it extremely sensible for boroughs to sell off high cost/low income units. Fourthly, RSLs are struggling with making Andrew Stunnell’s (un-) Affordable Rent model stack up, and are unlikely to settle for a mere seven year lease period in which to generate a surplus on a run down property. However, where your idea may have more currency is a situation where a council uses future predicted surpluses of its HRA to promise a guaranteed income to an RSL for bringing an empty property into use, or, on a more significant scale, uses it to effectively back-end grant new housing that starts off as private and ends up as social. There is an interesting story on how to do this in Inside Housing’s reporting yesterday of a London Councils report on this.
3) Average tenancies in London are over 20 years at the moment. Annual tunover is about 2%. The time it will take to free up exisiting homes at this rate is so long, and the numbers are such a dribble, that this is a marginal solution at best, regardless of the alleged merits.
4) Interesting. You should start modellig this to see what numbers it could deliver. the cost of housing is the killer here – it will take years and years to save up enough to buy.
The best way to solve the problems of the southeast is for businesses to move to other areas where houses are more reasonably priced – their wage bill will reduce significantly (as they don’t have to offer such high salaries to persuade people to work for them), thus making them more competitive than those that remain in the southeast. The bad solution would be to improve the infrastructure in the southeast to pander to the businesses that can’t be bothered moving.
There isn’t mush of a shortage of housing the UK. As we all know, house prices rocketed over the last decade because of increased demand in the form of easy credit. The reason they haven’t far is simply because of interest rate slashing. The obvious answer is to put monetary policy back in the hands of the elected government (the unaccountable MPC is an affront to democracy) and increase interest rates. The sooner house prices come down, the sooner the economy will recover (and the sooner those wanting to buy a house will be able to afford it).
Alternatively, a Land Value Tax would sort things out.
Hi Emily
thanks for replying:
“…replace the grants with loans enforceable after a couple of years…”
Personally, I would say 2 years is to long, it would tie up council money when it could be used for other things. As the discussion is mainly about the problems in London I would guess that there is huge demand for housing, so it should be possible to fix a property and get it sold/occupied very quickly. If that is the case then you could do a repayment on sale/6 months max or (for rental) repayment over one year from loan.
“Housing Associations may not want short leases on properties because they are not mortgageable.”
Probably true, but I was thinking more of the cost of repair – if a council can’t afford to repair a property then I can’t see a housing association wanting to do it and then have to give it back in 7 years. I think the lease would have to be long term.
“Just upping the rent on tenants as their income increases is not a great motivator for work it is rather like as second tax only payable by social tenants.”
I find that quite a strange statement, people want to improve their lot for many reasons so I don’t see rent as a huge demotivator – I would say the benefits issue that you mention is the main cause. If rent costs were the reason then you probably wouldn’t have as big a housing problem as there wouldn’t be the great influx of people into London and the South East. A graduated level of rent could factor in various levels of income, so the effect could be gradual instead of being a hammer blow.
I still think a bond system would be very problematic and expensive, it would have to be administered by a third party (I doubt if all councils have the expertise to run such funds), you would effectively be providing an enforced saving scheme and would (probably?) need to underwrite losses as well as having some sort of system to check that people are spending the money in the intended manner. There would also be a requirement for some sort of centralised system to ensure that (for example) people moving between councils carry forward any savings or (just as importantly) haven’t found a way to buy in one area to rent and moving to social housing in another council.
There would also have to be a system to assess income levels and if you’re going to do that, why not just have rental bands and invest the income into new housing stock?
Yes. This is because it is an article with her name on it, rather than being found under the “policy ” section on libdems.org.uk.
Seriously, why are you even remotely confused about this?
I agree that it is political will that is stopping some councils pursuing empty homes. The legislation means the cases go to a tribunal which means neither side can claim their legal costs and no lawyers are required. Norwich has been doing a lot of work in this area they clubbed together with neighbouring districts and employ a person full time who is bringing the properties back into use
the 5000 figure comes from an evening standard article based on freedom of information questions. They state 3000 properties have been empty for 3 months or more. if you look at the empty homes agency website they quote 8268 however when I spoke to them they said they could not say how many were long term voids. I contacted one of the london councils and asked how they managed to have such a high void rate was it becasue they had a high housing stock with lots of tenat movement and lots of properties were left vacant for short periods of time. They said no it was becasue they did not have the money to repair the properties.
Why I say 7 years is that leases over 7 years require ministerial consent.
The idea would be to get new money into the system by setting up a social enterprise funded by social bonds. Given the risk of investing in one of Ken Clarke offender rehabilitation schemes this may be a better option. Depending on price of the lease and who is housed at what rents but this could easily be negotiable.
On the tenant bond scheme. I agree the figures need to be worked out just a brief look at the DCLG website indicates private rented sector average rents for London at £565 or £900 per month depending which table you look at and average local authority rents being £280 per month.
Andrew Suffield you are correct these ideas are not Lib Dem policy or Lib Dem GLA policy it is just my opinion as the title suggests.
If we are to build houses to “meet the need” how are we to stop them being snapped up by “investors” who don’t need them but want them as a more sure way of growing their savings than anything else? Indeed, in my part of London that seems now to be the general way these things work – every bit of new build they squeeze on little bits of land that can be found, see the “For Sale” signs go up when they’re built, see the “To Let” signs go up a few weaks later. People that don’t need the housing can always afford to bid more than people who do need it, then it’s a ready money-spinner as they can let the housing out to those who need it but can’t afford it, and the rent will always come in because housing benefit tops it up or pays it.
How are we to stop new housing in nice rural parts being snapped up as second homes rather than meet the needs of those who don’t have first homes? You are never going to build to meet demand because demand keeps growing – we can all demand a nice city penthouse, a country mansion, a holiday home somewhere else, a flat in a university city for our kids when they become students, and if we’re wealthy enough that demand wins in the bidding against those scrabbling to pay for anything to live in. And then, since we can rent it out or get nice capital gains or sell up the housing we inherit from our parents, if we are rich enough to win out we have even more money we can outbid the needy with to win more.
Unless this sort of thing changes, building to “meet demand” is futile. The point has to be reached where we must say bluntly “if you want your green surroundings, you’re going to have to accept housing no longer being the money spinner you have got used to it being; if you don’t want to live in gated compounds to protect you from the mob, you’re going to have to accept some sort of rationing of housing to give a more equitable distribution”. By “rationing” here I do not necessarily mean in a struct form, but I do mean some measures which make it difficult to hold onto more than your reasonable needs.
I appreciate this is unpalatable to the point few active in politics dare say it. But aren’t we always being urged to “think outside the box” or “to accept the unacceptable” because we are in a crisis that needs to be solved? How come this sort of thing generally boils down to policies on the economic far right and never on the left?
This is why I have little sympathy with the various protestors around at the moment because they stick to vague protest noises rather than spelling out things like this which are really needed to rebuild a more fair society. Housing is at the root of our economic crisis, the boom in prices without any real productive work causing it led to the boom in borrowing and a feeling we were becoming more wealthy whereas really we were just borrowing more than we could afford to sell houses to each other, or rent then out at exhorbitant rates paid for by the taxpayer as housing benefit. Much of the swirling around of money in the City is part of this. I’d have much more sympathy with “Occupy” and the like if they were pushing the agenda towards making land taxation and the like politically palatable, as the hard economic right have pushed hard to make what once would have been considered unpalatable policies become acceptable. But they are not, are they? Indeed, looking at the social composition of that lot, I rather suspect many would pack up their tents and sulk should we actually suggest denying them the big dollop of cash they stand to inherit from mummy and daddy.
Hi Emily
“… average rents for London at £565 or £900 per month …”
I was quite surprised at those figures so I had a quick look at the spreadsheets, it would appear that the data is quite old (going back to 2006). If you look at other sites (e.g. http://www.londonpropertywatch.co.uk/average_rental_prices.html) I think you may find that prices have gone up since then, it looks like you won’t get much change out of £900 pm nowadays even if you’re in a low rent area (I don’t live in London so someone else would need to confirm that the rates shown are realistic).
@Matthew Huntbach
I actually agree with a huge amount in your post, however I would add that another way of reducing costs is to have a better spread of work across the UK. At the moment we have areas that everyone wants to move to (e.g. just about anyway on the M4 corridor from London to Bristol) because that is where the work is perceived to be.
Whilst various attempts have been made to move public sector jobs, we do need a lot more private sector employment around the place – but preferably without just creating new clusters of high priced housing. Getting that done would probably take some one with long term vision and willingness to put aside short term political point scoring.
@ Matthew Huntbach
One reason why house prices have rocketed is the shortage of homes that people like to live in in places where people want to live. If you massively increased the supply of homes, the prices would stop going up by so much and, over time, housing woudl not be seen to be the investment it currently is. We should aim to have a German level of house price inflation rather than a British one.
You are right that we need to think creatively about how to increase the supply of homes, especially to those who would like to buy and are able to, but can’t get the deposit together. In Central London 53% of residential sales last year were to foreign buyers taking advantage fo a devalued pound and seeking a good investment in a stable country. Would it be feasible to ban sales of homes to foreigners? Unlikely. But very high taxes on homes not occupied for more than, say, three months a year, and and end to any benefit to having a second home (recent DCLG announcments on this were welcome) should all be considered. As should a desire to redistribute jobs around the UK, insofar as anyone has any idea how to do this. Butt he bottom line has to be supply. Around 220k households pa are being formed, and we are building less than half the homes needed to meet this. Regardless of who buys those homes that are produced, there is simply a shortage. The number of hew households and the numbers of new homes need to roughly match in any given year, and they haven’t for at least a decade, if not two.
LondonLiberal
One reason why house prices have rocketed is the shortage of homes that people like to live in in places where people want to live. If you massively increased the supply of homes, the prices would stop going up by so much and, over time, housing would not be seen to be the investment it currently is
Er, yes, well I’d like to live in Mayfair so would millions of others, so let’s build a million more houses in Mayfair and we’ll satisfy demand and bring down the high cost of housing there.
OK, ok, that’s silly – I’ll settle for Hampstead instead – half a million in Hampstead, half a million in Mayfair? Ok?
In Central London 53% of residential sales last year were to foreign buyers taking advantage fo a devalued pound and seeking a good investment in a stable country.
Indeed, this is another sign of the way our country is being gradually bought up and becoming a colony of the international super-rich. It’s telling how those who pose as champions of “UK independence” will rant on about the EU, but have nothing to say about things like this. Indeed, scratch them a bit more and you find the main reason they oppose the EU is because they don’t like the way international co-operation slows the colonisation of our country by the global super-rich. Well, either that or they’re fools who have been duped by those who know what they’re doing when they falsely push the EU as the main threat to true independence for our country and its people.
When I play with this analogy of Britain becoming a colony just as we colonised India and parts of Africa in the past, I find the parallels become uncanny and rather frightening. Imperialism was sold on the grounds of it being inevitable and modernising and to the benefit of the natives even if they had to be forced or fooled to accept it because they weren’t modern enough to appreciate it. If the natives were too lazy or became uppity, you could easily bring in coolie labour to do the work. Mostly you could satisfy the natives with glass beads and the like. You could gain control by winning over the tribal elders. giving them the glass beads to hand out to the rest, letting them keep their tribal assemblies so long as those assemblies were subservient to the real rulers, but gave the impression to the lower orders they were still in charge and the imperialists were just honoured guests. You preached the gospel to them, carefully emphasising those bits that suited you and not those bits that didn’t.
So now you see – we have the gospel of neo-liberalism, and they have the land, well 53% of central London residential sales.
@ Matthew – you have misinterpreted my point about homes where people want to live, sorry i wasn’t more explicit. I was talking regionally – ie London and the south of England, as, as you will know, there are lots of empty homes in northern england, but as there are relatively fewer economic opportunities there, people understandably don’t want to move there.
hope that clears things up for you.
oh, Matthew before you suggest that i am talking about concreting over the south east, i would just say that we could meet all of the south east’s backlog of housing need by building on brownfield land in the thames gateway (not that i’m suggesting it shoudl actually all be there). we have the land, plenty of it, but need to public investment to make it viable.
LondonLiberal
i would just say that we could meet all of the south east’s backlog of housing need by building on brownfield land in the thames gateway
I take it you’ve never been to Abbey Wood (most people haven’t). Or anywhere else round there. Sorry to be rude, in case any SE2ers are reading, but actually, no that’s not where people REALLY want to live.
Actually, a lot of what is dismissed as “brownfield” has great ecological value. The idea that there is large amounts of building land easily available in London and the south-east falls down when you try building on any of it. I’ve lived all my life in London and the south-east,m and to see the way all the little bits of empty land are getting crammed with housing saddens me. You also have ignored my point about it all being bought up by buy-to-let merchants. How are you to ensure it goes to those who need it rather than those who have money to buy it?
The point I’m trying to make is that sooner or later, we ARE going to have to consider policies which up till now have been written off as unacceptable because they go against the scared idea that home ownership should be a cash machine. Those who live in nice green bits of the south-east in particular, so those most likely to protest at new build in their back yards MUST be got to see that the cost of keeping it green is that they may have to pay handsomely in land taxes and the like, rather than just assume once they own the place that’s it, money, money money is theirs and their heirs for free.
If we can’t say this sort of thing, it would be great of someone else could to press home the message. What about all these anti-capitalist protesters starting the ball rolling? This is at the heart of inequality in this country, so if they meant what they claim they would be helping set the agenda this way. Only, they don’t, do they? And if you look at the way they’re mainly posh kids with parents living in nice big houses, maybe you can see why not.
@Matthew Huntbach
You are absolutely right in pointing to BTL as the current source of the inability of aspiring owner-occupiers to buy a house. However, it is interest rate slashing that has saved the majority of BTLers from financial oblivion. The majority bought in the last few years of the bubble, when prices and yields made no sense. The only way first-time-buyers are going to out-compete BTLers is if interest rates rise (savings accounts will look a better bet than BTL, and house prices will fall faster, aiding FTBs).
London is in a massive bubble at the moment – for some reason people are still happy to throw money at insane property purchases in the capital, thus keeping prices high for the time being. As a result, yields in London are far lower than the rest of the UK – it makes no sense whatsoever to buy BTL in London, but people keep doing it when they could get a far better yield by buying in County Durham (where prices have fallen 26% and now make sense) with a far lower risk of prices falling (given they haven’t fallen yet in London).
Property is a dreadful investment if you bought after ~2001 – the Halifax index shows UK prices are the same as 2004 in nominal terms. in real terms, they’re much lower (and yields during the same period have been at a record low). It never ceases to amaze me how people talk about it being a good investment.
If people had received a proper financial education then we wouldn’t be in this mess mess (both the housing & economic mess, given the economic problems were caused by the banks blowing a housing bubble with a credit bubble to feckless borrowers).
Matthew
i’m not sure it’s fair to say that abbey wood is not where people want to live – it may not be where you want to live, but evidently some people do want to live there. I think you’re setting up slightly unnecessary oppositional arguments anyway. I’m not for a oment suggesting we park poor blighters in rubbish estates, rather that we build well planned, high quality environments that seem to be achived quite regularly on the continient but which we often fail to deliver here. Places can change with investment and perception – if you had told my father that shoreitch would have desirable expensive apartments and woudl be a trendy area to live in, he’d have laughed you out of the room. Thirty years on, that’s where we are.
Yes, a lot of brownfield land has great ecologial value, and some green belt is horrible. So i guess you support the redefintion of brownfield in the NPPF as ‘land of the lowest environmental value’?
As for buy to let merchants, it’s a difficult one, and i don’t have the answers. we need more state building to ensure there is enough decent social housing for those who need it, but for those who are priced out of the market who could buy, i’m not sure that restricting BTL landlords would be achieveable or practical. The answer in the long term is reducing house price inflation but in the short term, outside of massive new building programmes, i simply don’t know what would actually work.
the argument that there are large amounts of land in the SE available for building doesn’t fall down when you start building on it, by the way. If anything it reinforces it.
@London Liberal
We don’t need to reduce house price inflation, we need to let prices fall. They have been falling over the last 12 months in pretty much all of the UK outside of London. We’re still several years away from the bottom (given the timescale of previous boom/busts).
On buy to let landlrods. I think it is influenced by central government strategy. Prior to 1988 you had Rent Act tenancy with fair rents rather than market rents and lots of security for the tenant. The amount of properties in the rented sector was limited becuase it did not make financial sense to let out the properties. In 1989 the tories brought in Assured Shorthold Tenancies for the private sector which have market rents and low security the landlord has a mandatory right to possession at the end of the term of the tenancy which is usually 6 months. This increased the amount of property in the rented sector. At the same time you have the Right to Buy and limited numbers of social houses being built. Both the Tories and Labour looked to the private landlord to provide accomodation with the help of housing benefit. Easy mortgages meant lots of people became private landlords remortgaging their own homes to buy a property to be a buy to let landlord some saw it as a pension plan. Based on the miserableness of the solicitors I train who used to represent these people that area has dried up with the lack of mortgages. In fact after the crash the only happy solicitors I trained in this area were a firm of city solicitors who where repossessing all the buy to let properties. So what I am saying is that the buy to let landlord was the product of easily available loans and government policy opening up a new area of business for people. The future buy to let landlord may look very different.