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Affordability

Top Civil Servant in Charge of Housing Says Housing Crisis Will Continue Under Current Government Policies

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One of the Government’s most senior housing civil servants has admitted that new government policies will not end the housing crisis and that homelessness will continue to rise.

Questioned by MPs about why the Government is failing to build enough homes, the Permanent Secretary to the Department for Local Government Melanie Dawes admitted that Theresa May’s new policies will not stop the country’s housing crisis from continuing “as it has done for decades.” Miss Dawes added that she was “simply being honest” when she revealed that houses prices are set to stay out of reach of those who cannot offered a property and that homelessness will continue to rise.

The revelation  comes less than one month after after ministers launched a new White Paper “Fixing our broken housing market” which promised radical policies to solve the housing crisis and increase the supply of new homes.

When asked whether the housing crisis will ever resolve itself, Miss Dawes claimed that “It will continue as it has done for decades, I agree, and that will show itself primarily in affordability and in some places in homelessness”

Revelations about the UK’s inability to tackle the housing crisis comes as average house prices have surpassed ten times the average salary in some parts of the country. In November 2016, data published by the research firm Hometrack showed that with house prices in London are now 14.2 times the average salary. Cambridge, Oxford and Bristol  were also identified as highly unaffordable cities with house price-income multiples close to those in the capital. At the same time the number of households made homeless has risen to more than 50,000 per year.

Commenting on the comments made before the public accounts committee, Labour’s shadow housing minister, John Healey, claimed that Miss Dawes’ appearance confirmed the Government’s policies were not working. “It’s clear that the Government’s housing plans have failed, are failing and will continue to fail.”
“Since 2010, home-ownership has fallen, homelessness has more than doubled and affordable house-building fell last year to the lowest level in 24 years.
“After seven years in Government, there’s now a huge gap between the rhetoric and record of Tory Ministers on housing. We need less hot air and more homes from Ministers to fix this housing crisis.”

During the presentation of the Government White Paper in Parliament, the Communities Secretary Sajid Javid, said: “The housing market in this country is broken and the solution means building many more houses in the places that people want to live.”

Mr Javid also claimed that relative to population size, Britain has had Western Europe’s lowest rate of house-building for 3 decades. The Communities Minister claimed that the Government would honour its 2015 manifesto promise to preserve the green belt yet remove the Government’s role in land-banking and free up more public sector land more quickly. Furthermore, in a reversal of decades of housing proposals, the white paper indicated that new homes will be built to rent rather than for first-time buyers.

The extent of the housing crisis comes as data show that private sector rented housing is the most expensive and has the lowest standards of any housing type.  According to Parliament reports, private renters now spend an average of 49% of their income on rent despite nearly one-in-three privately rented houses failing to meet minimum government housing standards.

The Renters Alliance helps renters with bad landlords and letting agents. If you have a story you would like to share, please contact the National Renters Alliance through our website or email us at contact@nralliance.co.uk

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Affordability, London

Central London House Prices Underperform the Rest of the UK Falling the Most in Six Years

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London price decline

House prices in London posted their largest yearly fall in almost six years in February according to the property website Rightmove. The figures represent the first annual decline in London house prices since April 2011.  It is believed that high asking prices and fears over Brexit have been putting off buyers.

While February asking prices are up compared with January, the 2.6 per cent increase is the weakest monthly gain for a February since 2009 during the height of global financial crisis.

Across the capital, house prices fell by 0.4 per cent compared with last year with the average property in London now costing  £641,116. Reversing the trend of a stronger performance compared with the rest of the UK, the London housing market under-performed the rest of the country during 2016. The latest sign of housing market weakness continues the trend set in the second half of last year. In addition to Brexit fears, tax increases on investors in the early part of the year have been suggested as factors in reducing demand for prime London real estate.

Nationally annual house price growth slowed to the weakest in almost four years this February with average property asking prices rising 2 per cent to £306,231. This represents the weakest February property performance since 2009 well below the 5 percent average gain for the month over the past seven years.

The picture across London as a whole is more mixed. Central London led the price slowdown with asking prices falling 2.1 per cent compared with February a year earlier whereas  Outer London suburbs registered a price increase of 1.4 per cent. However, comparing the relative performance between January and February, inner boroughs outperformed as owners of more expensive homes boosted the average by listing their properties for sale after the Christmas break.

Continued

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Rightmove claims that potential buyers may also have become price-sensitive as inflation erodes real incomes. The company’s director miles Shipside added: “Perhaps we’re approaching the territory where many buyers are unable or unwilling to pay what sellers are asking, given the negative combination of rises in the cost of living, tighter lending criteria, and a dose of Brexit uncertainty. Values have boomed since 2013, so it’s not surprising that upwards price pressure is running on tired legs.” 

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Affordability, Renters rights

Private renting virtually impossible for benefit claimants

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House to rent no dss

Increasing numbers of Housing Benefit claimants are being excluded from the private rental sector as the number of properties listed as ‘No DSS’ grows according to a House of Commons Briefing Paper. ‘No DSS’  (standing for “Department of Social Security” which was replaced by the Department for Work and Pensions 16 years ago) means the landlord or agent won’t rent a property to someone on housing benefit or local housing allowance.

The House of Commons reports corroborates anecdotal evidence from the Hackney-based private renter information and campaign group Digs which found only one studio flat on the market available to Housing Benefit claimants in a survey of 50 local estate agents between December 2015 and February 2016.

Despite calls from  renters rights groups to outlaw the proscription of renters receiving state benefits on discrimination grounds, the House of Commons briefing paper stated that such restrictions on Housing Benefit claimants is “unlikely to amount to direct discrimination as income and employment status are not protected characteristics under the Equality Act 2010.”

The paper also highlighted other factors which may be exacerbating landlords’ reluctance to let to Housing Benefit claimants which include:

  • uncertainly around the roll-out and implications of Universal Credit
  • the payment of Housing Benefit in arrears
  • restrictions in mortgage agreements and insurance requirements
  • impending tax changes resulting in landlords focusing on “less risky” tenants.

The House of Commons report was soon followed by significant coverage of the publication of a list of banned tenant types from Britain’s biggest landlord, Fergus Wilson, which included tenants receiving benefits. Mr Wilson also included workers on zero-hour contracts, single parents, battered wives and plumbers on his list of undesirable tenant types.

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In addition the the reluctance of many landlords to rent to people on benefits, mortgage lenders may also be exacerbating this situation. In 2012 for example, the buy-to-let lender, The Mortgage Works, stated that no new mortgages would be advanced to landlords whose tenants received benefits. This condition was later withdrawn after significant negative press coverage. Other property letting websites also include a search filter to screen out properties which do not allow tenants on benefits.

This situation is of such importance to large numbers of renters that the housing charity Shelter has published a guide for benefit claimants to  convince a landlord to rent to them.

 

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Affordability

One in five private rented homes suffer fuel poverty

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fuel_costPrivate sector renters are one of the groups with the highest risk of suffering from fuel poverty according to figures recently released from the Department for Business, Energy and Industrial Strategy.

More than 2.3 million families, equivalent to around 10% of households, are living in fuel poverty in England.  The situation is particularly bad for private sector renters with one in five households renting from private landlords affected. The highest risk however, at 25% of all households, was found for single parents with dependent children.

Overall Birmingham is the most affected city in terms of absolute numbers with around 60,000 households unable to afford adequate heating with Leeds, Cornwall, Manchester and Liverpool occupying the top five local authorities where households struggle with heating costs. In terms of the proportion of households classified as fuel poor, rural areas of England are the worst affected, with more than 20% of households on the Isles of Scilly classified as fuel poor. Other areas identified as badly affected include Eden in Cumbria, Richmondshire and Ryedale in North Yorkshire, and West Devon.

Officially a household is in fuel poverty if its income would fall below the official poverty line after subtracting the cost needed to adequately heat a home. It has been calculated that on average households which meet this definition would require an extra £371 to be able to adequately heat their homes.

The issue of fuel poverty and energy costs is a recurring theme in UK politics. Reacting to the report, the shadow business secretary, Clive Lewis said that the figures showed that the Conservative Party had to take action to tackle high energy prices charged by the big energy companies.

“Under the Tories’ lack of an energy plan, Britain is facing an energy bill crisis, with over 2 million families who can’t afford their energy bills.”

Mr Lewis continued to assert that a Labour government would confront the problem by increasing clean energy generation capacity and tackling energy bill rises for households.

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To date the successive Conservative governments of David Cameron and Theresa May have favored the provision of greater consumer information and the easy switching of energy supplier as a mean to reduce household fuel expenditure. These include announcements earlier this month that the business department would publish an energy supplier league table to allow consumers to better assess their energy usage and compare energy suppliers. However, some critics of these proposals note that tariff transparency has been promoted throughout the Brown and Cameron administrations with relatively little effect on reducing household energy bills.

Announcing the league table measures, the business secretary, Greg Clark, said: “Millions of people across Britain continue to pay too much for their energy. The measures announced are a positive step to help more people benefit from increased choice and competition.As the government has made clear, where markets are not working for consumers – in energy or otherwise – we are prepared to act.”

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Affordability, Housing, London

London house prices predicted to fall 5% in 2017

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London House Prices Predicted to Fall 5 per cent

Property prices in central London are expected to fall by 5 per cent in 2017 according to property data firm Rightmove.

The situation across London as a whole however was mixed with a significant variations between market conditions in prime central London and peripheral areas.  Outer London property prices are expected to see an approximate 3% increase in prices in 2017 Rightmove suggests with prices across England and Wales expected to rise by two per cent as a whole next year.

Brexit uncertainty continues to be a serious issue  with respect to property price forecasting. As yet the government’s desired outcomes and the negotiating position it will adopt following the triggering of  Article 50 to begin the two year countdown to leave the European Union remains unknown. Prime Minister Theresa May says she is committed to triggering the start of formal Brexit negotiations by the end of March next year and is expected to make announcements on the Government’s preferred future relationship with the EU in the New Year.

The disconnect between property prices in central London and the rest of the UK may be symptomatic of London’s traditional early reaction to changes in the British economy. During the 2007 global financial crisis and subsequent recession, prime London properties were the first affected by the downturn but were also the fastest to recover.

To date predicted negative economic data following the UK’s decision to leave the EU have failed to materialize. The British Chambers of Commerce revised up its forecast for economic growth next year but downgraded the outlook for 2018 due to inflation pressures and ongoing economic uncertainty about Britain’s future trading relationships with the EU. In terms of GDP forecasts, the Chambers revised upwards UK GDP growth forecast to 1.1% from 1% for 2017 after stronger-than-expected economic performance following the June Brexit vote.

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Affordability, London

Sadiq Khan asks LSE to investigate London housing market

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London mayor, Sadiq Khan, has asked the London School of Economics to carry out a comprehensive inquiry into the impact of foreign investment on London’s housing market.

The inquiry which is expected to report back to the Mayor in the spring will investigate the dependence of property developers on foreign buyers and the number of properties kept empty.

Sadiq Khan is keen however to stress that the report is not intended to provide material which might be used to curtail the rights of overseas buyers in London.  Announcing the study, the Mayor underlined the importance of foreign investment in London but also noted that further study was needed to understand the connection between London’s property affordability crisis and foreign investment. The Mayor added that many Londoners were concerned about the number of homes left empty and the link between empty properties and overseas investors.

The current study follows numerous reports that London is being used as a safe-haven for Russian Oligarchs, Chinese Princelings and Middle Eastern Sheikhs.  Many properties in the capital are held by companies in offshore tax havens and many are unoccupied. Khan’s predecessor in City Hall, Boris Johnson, notably called for property developers to market new homes “first or equal first” to Londoners rather than to overseas buyers.

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Affordability, Housing, London

House Prices in Chelsea fall 9.8% annually in September

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London House Prices Fall

House prices in Chelsea have fallen by 9.8 per cent annually with prices for high-end homes in central London falling by 2.6 per cent in September.

Property consultants Knight Frank claims that changes in stamp duty rather than the effects of the Brexit vote in the EU referendum is the main factor for the house price decline. The firm also claims that the Brexit vote may have been “a catalyst for overdue price reductions” in the sector.

Overall the picture across London as a whole has been mixed. Some parts of prime north London have seen price falls of 7.5 for Hyde Park and 5.3 per cent for Notting Hill.  Islington on the other hand witnessed an increase in prices by 3.6 per cent. In the high-end rental sector the picture has been similarly varied with rental values for prime central London properties falling by 4.7 per cent on an annual basis with rent falls of 9.9 per cent in Marylebone and 8.3 per cent in Chelsea.

Properties are also spending more time on the market with the average number of days taken for a property to sell increasing by 14 per cent between January and August compared with the same period last year.

There are also advantages for renters in the capital with rental values also falling for high-end homes. In September, rental values for prime central London fell by 4.7 per cent on an annualized measure.

Chelsea and Marylebone notably saw rents falling by 8.3 per cent and 9.9 per cent annually.  The picture for areas further out was quite different with Areas further out saw less dramatic rent falls with King’s Cross and the City Fringe seeing average rents rise by 1.9 per cent and one per cent respectively.

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Affordability, Government

Private landlords receive £9.3bn in housing benefit

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Private landlords received £9.3bn in housing benefit payments, almost double the amount a decade ago according to a study published by the National Housing Federation.

This situation is set to deteriorate with the decades long trend of decrease home ownership exemplified by a House of Commons research report published earlier this year which reported that 48 per cent of 25-34 year-olds in England now rent,  up from 21 per cent in 2003-04.

The National Housing Federation report found an increase of 42% in the the number of households using housing benefit to pay rent to private landlords since 2008.  Housing benefit is paid to households that cannot afford to cover rental costs in addition to essentials such as food, clothes, heating and lighting.

This situation has been exacerbated by stagnation in real middle-income household earnings with the greatest increase in housing benefit claims coming from households with net incomes between £20,000 to £28,000 per year.  Furthermore, in 2008 around a quarter of private sector tenants in receipt of housing benefit were in employment, a figure which has risen to almost a half today.

In order to address the crisis in property ownership in the UK both parties have adopted standard policy positions.  The Conservatives  have signaled a preference for supply-side solutions to improve housing affordability with little detail on easing planning restrictions and tackling construction sector skills shortages.  Labour on the other hand have suggested a combination of rent-controls and investment in social housing with few details on the practicability of such proposals.

The National Housing Federation claims that if all those housed in the private rented sector lived in affordable housing, taxpayers would save £1.5bn a year in housing benefit payments. The federation’s chief executive, David Orr has said, “It is madness to spend £9bn of taxpayers’ money lining the pockets of private landlords, rather than investing in affordable homes. Housing associations want to build the homes the nation needs. By loosening restrictions on existing funding, the government can free up housing associations to build more affordable housing at better value to the taxpayer and directly address the housing crisis.”

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Affordability

Almost Half of 25-34 Year-Olds Now Rent

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Almost half of 25-34 year-olds in England now rent according to a recent House of Commons research report.  The briefing assessing Government initiatives to extend home ownership claims that 48 per cent of the 25-34 year old age group now rent their homes up from 21 per cent in 2003-04.  However, given the choice, the report states that 86 per cent of this age category would prefer to own their own homes rather than rent.

London Centrism

The housing crisis is particularly acute in London. According to Alan Holmans of the Cambridge Center for Housing and Planning, the house-price-differential between London and the rest of the UK has climbed to a post-war peak and is currently 85 per cent higher than the UK average.  However, the differential between average London household incomes and the rest of the United Kingdom, is only around 32 per cent higher.

Chancellor intervenes

The scale of the housing crisis has lead to a series of proposals in recent years including Chancellor George Osborne’s announcement of a “Five Point Plan to increase home ownership”  in his 2015 Autumn Statement and Spending Review. This included  a commitment to build 400,000 affordable houses by 2020-21 among other measures. This was soon followed by the launch of the “Help to Buy London” scheme in February 2016 in recognition of higher housing costs in the capital.

Buy-to-let effect

The effect of buy-to-let landlords was also highlighted by the Chancellor as a potential exacerbating factor in house price inflation.  Accordingly in his Summer 2015 Budget, the chancellor announced plans to restrict tax relief on landlords’ mortgage costs. This decision is currently being challenged by landlord’s organizations which have hired to the legal firm Omina Strategy, which was founded and chaired by Cherie Blair.

Moreover, in order not to penalize buy-to-let landlords with mortgages against those who buy additional properties in cash through restrictions in mortgage interest rate relief, the Chancellor also announced that a 3% increase in stamp duty which will be levied against purchases of additional properties.  The Chancellor argued that the buy to let sector had had a disproportionate impact on the housing market as a whole, and that many buyers had not been affected by earlier tax changes, announced in the 2015 Summer Budget.

 

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Affordability, Housing Standards, Renters rights

Majority of London renters forced to live in unacceptable conditions

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60% of renters in London live in unacceptable conditions according to a survey carried out by YouGov and the housing charity Shelter.

The survey of 739 private renters in London between 13th June and 22nd July 2015 found that  around 60%, equivalent to around 1.5 million Londoners, have experienced problems in the past year. According to the survey with vermin and damp commonly reported problems were found to be:

  • Damp or mould (39% of renters)
  • Poor insulation or excess cold (26%)
  • Animal infestations such as mice and cockroaches (25%)
  • Problems with a leaking roof or windows (18%).

In addition to poor disrepair, a significant fraction of renters had experienced unsafe conditions with 14% reporting electrical problems and 15% living in homes which are poorly secured. Most worrying were the 3% of renters who reported gas leaks. According to the English Housing Survey 2013/14, 16.5 per cent of private rented homes fail the Government’s minimum standard under the Housing Health and Safety Rating System.

The poor state of rental housing stock in the capital stands in stark contrast the the cost of rented accommodation with the average London renter paying just under 60% of their income on rent.

The seriousness of the rental crisis in the capital and across the country as a whole has led renters rights groups to campaign for the introduction of greater council powers to address disrepair in the private rental sector.

Other proposed initiatives include the establishment of landlord licensing to better protect renters from rogue landlords and letting agents.  Landlord and property licencing is currently mandatory for large HMOs (homes in multiple occupation) although there are calls to extend this regime to all HMOs irrespective of size and to other private rented accommodation.

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