"Build build build. We must build more homes." Any politician who came out with such a statement would be greeted with near universal applause. Build them and they will clap.
“Build build build. We must build more homes.”
Any politician today can say that and be greeted with near universal applause.
As a country we do need to build more homes and the political class is finally recognising as much.
Today it takes a first time buyer saving half their annual income more than 10 years to put together a deposit for their first home, and in London that figure rises to 24 years.
In part this is down to a surge in property prices caused by a shortage in the supply of new homes. In the first few months of this year alone a shortage of sellers and a scramble by home buyers has fuelled a seven per cent rise in property asking prices, according to the LSL Acadametrics house prices index.
While the government clearly should build more homes, first of all to bring the housing market back under control, there will surely come a time when it is no longer desirable to cover increasingly large areas of land with bricks and mortar.
Such a policy would also likely meet increasing opposition as a result of its own success (as more people own homes they would be more likely to oppose the building of new ones if they think it will affect the price of their own).
There’s also another elephant in the room: second homes. Second home ownership has been found to drive up the price of homes, especially in places where second home ownership is increasingly common such as Cornwall. The higher the rate of second home ownership the more a first home tends to cost.
In the City of London a quarter of all dwellings are now second homes. Second home ownership also exceeds seven per cent of the housing stock in rural areas like South Hams, North Norfolk, Purbeck and South Lakeland.
Sure, a mass house building programme will bring prices down in the short term, but the tendency for monopolisation within the housing market is surely not that different from anywhere else. The more homes you own the easier it becomes to accumulate more, especially so when property is increasingly viewed as an investment opportunity rather than a place to live.
This is already having a huge impact on those who have to rent a place to live.
A report out today says that average monthly rents in England and Wales will hit the £800 mark by 2015, a 21 per cent rise on 2010 rates.
Around 40 per cent of people’s take home pay is now going on rent – this excludes the increasingly steep fees demanded by estate agents for ‘administration’ and the deposits lost to landlords who suddenly discover previously non-existent ‘damage’ when it’s time to return the security deposit.
One potential policy response which has been mooted is rent controls. While critics of the policy say it would limit the supply of rented homes, in reality rents are likely to remain high unless the market is regulated more strongly in some way.
Rent controls are also already operating in some parts of the country with a degree of success. There are an estimated 100,000 tenancies in the UK to which ‘fair rent’ rules apply, meaning private sector tenancies that began before 15 January 1989 have rent increases limited to an amount linked to the Retail Price Index.
As Robert Taylor of the Camden Federation of Private Tenants says, the system is “far from perfect” but “very effective” at protecting tenants against steep rent increases.
We all need somewhere to live, but today the freedom to make a large amount of money on the back of this need seems to trump the need itself.
As a first step to tackling the problem, adequate social housing should be built with controlled and sensible rents which undercut the private sector. This in itself would bring down the price of rent substantially.
A cap on rents should also be considered for the much larger private rental sector. Many people below the age of 30 will never own a property, let alone a ‘portfolio’ to make a killing from.
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