A Real Housing Crisis But Only Fake Solutions On Offer

[kjw]

Overall, the manifestos confirm that all parties are unwilling to face up to the political problems they perceive would follow if they advocated solutions that might effectively address the crisis of housing supply. The illness is real but all that is on offer is snake oil; displacement activities treating some symptoms but not the underlying causes and – paradoxically – having the net effect of making the housing crisis worse, writes Paul Cheshire.

All the party manifestos are published now. All agree there is a housing crisis. The most recent data for housing starts in England show a fall of 19 per cent in the last quarter of 2014 compared to the post-2008 high or the 2nd quarter of 2014; and completions and planning applications have been flat-lining since 2009. The latest English Housing Survey Headlines showed a continuing rise in age for first time buyers and that the proportion of 25 to 34 year olds who were owner occupiers had fallen from 59 to 36 per cent over 10 years; and for the first time ever, more owner occupiers did not have mortgages than did. In other words all the evidence shows that house building is not significantly rising from what was a 100-year peacetime low in 2010, that the supply and affordability crisis continues – even gets worse – and the redistribution of housing wealth to the elderly continues.

A CentrePiece article last year explained that there had been a shortfall of building during the past 20 years of between 1.6 to 2.3 million and far too many of the houses that had been built were in the wrong places or the wrong type to satisfy demand. But – even worse – that the crisis was self-inflicted by longstanding policies.

Now we have Alice in Wonderland proposals: solutions that require us to believe six impossible things before breakfast and that words mean exactly what the manifestos say – not what they really mean. This will not build houses. Nor will promising to build 200,000 new houses a year (Labour), 230,000 starter homes (Conservative) or – any advance on 200,000? Yes, 300,000 a year (Lib Dem).

Targets and promises do not build houses. The experience of London demonstrates this. Since 2004 housing targets for London have risen from less than 20,000 to 42,000. There was a slight upturn in actual building in the boom conditions of 2004/05 to 24,000. Since then, as targets have risen, so building has fallen. In 2013/14 completions dipped to less than 18,000. To build houses one has to have land to put them on, a realistic diagnosis of the underlying causes and mechanisms for delivering them. Just raising targets or promising more houses simply means a larger shortfall between promise and delivery and an ever increasing unaffordability of housing. [more at link]

http://blogs.lse.ac.uk/politicsandpolicy/a-real-housing-crisis-but-only-fake-solutions/

[canbuywontbuy]

Why does the "more houses" argument never mention the need for prices to fall considerably? The "crisis" seems to assume there are buyers out there (at current prices), but simply not enough houses. Therefore, more houses (at current prices) is the answer. You can bet the government will introduce some new policies to ensure prices remain high, even if they build 300,000 new homes a year.

[Fully Detached]

Pointing out failings in the manifestos is like barking at the moon though, surely.

What they claim they will do is irrelevant, because whoever is in government will not choose their course through the crisis. Instead they will end up either under-reacting or over-reacting to events that they hadn't planned, hadn't foreseen, or hoped would be kicked into someone else's watch. In the context of the broken housing market, they all know damn well the only fix is to let nature take its course, but they also know it's going to be incredibly painful and electoral suicide for whoever is in charge at the time. There is no way to chart a painless course out of this situation - it's just a case of avoiding it as long as possible and hoping it's not you who gets hit by the tidal wave. FLS, HTB, and all the other props that have been tried so far are the political equivalent of pointing in the other direction and shouting, "Look, a plane!"

Whoever is in opposition when the inevitable happens is probably going to get a free run for the subsequent three terms.

Edited April 25, 2015 by Fully Detached

[pig]

Why does the "more houses" argument never mention the need for prices to fall considerably? The "crisis" seems to assume there are buyers out there (at current prices), but simply not enough houses. Therefore, more houses (at current prices) is the answer. You can bet the government will introduce some new policies to ensure prices remain high, even if they build 300,000 new homes a year.

It is utterly bonkers.

Essentially people are asking, through simple economic understanding, for prices to come down via house-building. But because its not explicitly said, it allows political parties to ignore this, and simply set about promising to increase house-building even if it means by increasing prices.

[awaytogo]

What's the point of building more houses for BTLers to buy up a soon as they are built? Unless BTLers are only allowed to buy new builds that would increase supply without taking the good stock (that is left) out of the market by BTL.

Whats the point of building of more houses which maybe could lower prices, when it would just encourage more of an influx from abroad.

[porca misèria]

Why does the "more houses" argument never mention the need for prices to fall considerably?

It's the implied assumptions. Either you're under 40 and can take on a full-length mortgage, or you have equity[1]. In the former case, the price may be high but the cost is rather below historic norms[2]. In the latter case, well, you have the equity ...

[1] Invisible minorities - like 50-year-old first-time buyers - don't count.

[2] Probably excluding that "golden age" of the mid/late-1990s.

[hackney]

The other issue is that the culture of the UK encourages home ownership, which is not for everybody.

In Germany they are quite comfortable with renting and don't view houses as such an asset.

It's just a shame that BTL works for many people. Such an unproductive use of money floating around in the economy.

Isn't it odd that right wing politicians are feeding the housing bubble, meanwhile they want to make spending cuts on public services! So much for free markets!

[subspace]

What's the point of building more houses for BTLers to buy up a soon as they are built? Unless BTLers are only allowed to buy new builds that would increase supply without taking the good stock (that is left) out of the market by BTL.

If there was an adequate supply of housing in the first place it wouldn't matter if the houses were bought by BTLers or OOs. The ratio of BTLs and OOs would reach a natural equilibrium to satisfy rental demand. Too many BTLers would force rents down causing some of the BTLers to sell to OOs. Not enough BTLs would force rents up making it more profitable and increase the number of BTLers entering the market.

[BorrowToLeech]

The centrepiece article, on which the OP is based, is just the usual abuse of house building statistics. It only looks at the number built, completely ignoring (amongst other things) the number demolished.

German bombing destroyed a lots of houses (probably hundreds of thousands). Afterwords, the slum clearances destroyed even more. Between 1955 and 1985 about 1.5 million houses were demolished.

And who is to say that the post-war building programme was the normal, neutral level? Were family sizes shrinking? Was there a pre-war shortage that needed to be dealt with?

Whatever the truth of the matter, those statistics won't tell you.

A better way is to look at the dwellings per capita. This shows a steady increase in the number of houses available per person.

Of course, that is also an imperfect metric. For example, it includes subdivision (shrinking houses), but it ignores shrinking family sizes (the desire to live in smaller families may mean that more houses are needed for the same population).

None of this matters.

If the physical housing shortage were significant, it would be obvious, and it isn't. There would be no ambiguity and no need to fiddle the numbers.

It would have to be obvious, because it would have to be comparable in scale to the obvious, massive, increase in the number of landlords. The one that neatly coincides with the timing of the crisis.

For a significant number of people 'I can't afford to buy' means 'I am forced to rent', which means 'a landlord outbid me for the house I live in'. It doesn't mean 'I have no house'.

Year Dwellings Population Ratio

1961 16,626 52,800 3.18

1971 19,259 55,900 2.90

1980 21,423 56,300 2.63

1981 21,577 56,400 2.61

1982 21,739 56,300 2.59

1983 21,928 56,300 2.57

1984 22,127 56,400 2.55

1985 22,328 56,600 2.53

1986 22,537 56,700 2.52

1987 22,805 56,800 2.49

1988 23,046 56,900 2.47

1989 23,273 57,100 2.45

1990 23,511 57,200 2.43

1991 23,552 57,400 2.44

1992 23,770 57,600 2.42

1993 23,956 57,700 2.41

1994 24,146 57,900 2.40

1995 24,336 58,000 2.38

1996 24,539 58,200 2.37

1997 24,731 58,300 2.36

1998 24,922 58,500 2.35

1999 25,105 58,700 2.34

2000 25,319 58,900 2.33

2001 25,468 59,100 2.32

2002 25,636 59,400 2.32

2003 25,835 59,600 2.31

2004 26,042 60,000 2.30

2005 26,274 60,400 2.30

2006 26,516 60,800 2.29

2007 26,772 61,300 2.29

2008 27,047 61,800 2.28

2009 27,266 62,300 2.28

2010 27,448 62,800 2.29

2011 27,614 63,300 2.29

2012 27,767 63,700 2.29

2013 27,914 64,100 2.30

[Dorkins]

If the physical housing shortage were significant, it would be obvious, and it isn't.

Number of 20-34 year olds living with their parents:

http://www.ons.gov.uk/ons/rel/family-demography/young-adults-living-with-parents/2013/sty-young-adults.html

Size of new-build homes continuing to shrink:

Britain's new-build homes are the smallest in Western Europe and many are too small for family life, says a new report by the Royal Institute of British Architects (Riba).

http://www.bbc.co.uk/news/uk-14916580

Is that obvious enough for you?

Edited April 26, 2015 by Dorkins

[R K]

What's the point of building more houses for BTLers to buy up a soon as they are built? Unless BTLers are only allowed to buy new builds that would increase supply without taking the good stock (that is left) out of the market by BTL.

Indeed. It's idioitic policy.

The only builder of last resort is the government.

Build 1m council homes. End of story.

[EUBanana]

Free up the planning laws, sit back. Job done.

Has the benefit that houses might actually be built in the right place, and all the money will come from private investment rather than the taxpayer.

[Venger]

Indeed. It's idioitic policy.

The only builder of last resort is the government.

Build 1m council homes. End of story.

I'd prefer to own one of the nicey terraces around your way, currently selling for £500K-£600K - rather than a state-organised build.... which takes things out of private market, and taxpayers pay for one way or another.

Which won't just be given away way below the rigged current wider market values for houses elsewhere, probably HTB type selling... even if such a build project may put some pressure on wider values around your way - but maybe not as ponzi supported.

Last terrace around your way I followed up at Land Registry (£3) for the buyer info... turns out it was a young female GP - mortgage with HSBC. Flippers had previously bought it in dated-state from estate of widower who had died, did the usual few coats of fresh paint job, and a few cheap tweaks. She paid something like £550K for it... where they had bought it 12 months previous for something like £340K... oh well... we could run out of such willing GP type buyers eh and their willingness to take on fat mortgages - but that would mean HPC.. .which some people are against.

[BorrowToLeech]

Number of 20-34 year olds living with their parents:

http://www.ons.gov.uk/ons/rel/family-demography/young-adults-living-with-parents/2013/sty-young-adults.html

Size of new-build homes continuing to shrink:

http://www.bbc.co.uk/news/uk-14916580

Is that obvious enough for you?

Not even close. Your graph shows about 1 million additional people who have to live at home (peak to trough), I'm taking about several million houses that have been taken out of owner occupation.

The first graph isn't evidence of a shortage anyway, whatever the numbers, since average overcrowding has fallen since 1997. On average, fewer people are living together now, so it's the distribution of houses that causes young people to stay at home longer, not the absolute number.

The second point is something I did mention, houses are getting smaller.

The shrinking of our already tiny houses is a largely ignored scandal, and a sign of our continuing impoverishment, but I think it is a separate issue. The cost of houses isn't measured on a m^2 basis (although it ought to be).

Remember, I am not suggesting we shouldn't build houses, and this is one reason that we definitely should. Millions of them.

I am only pointing out that the housing crisis is primarily caused by the greed of landlords, which is important because no politician will talk about it.

[iamnumerate]

The centrepiece article, on which the OP is based, is just the usual abuse of house building statistics. It only looks at the number built, completely ignoring (amongst other things) the number demolished.

German bombing destroyed a lots of houses (probably hundreds of thousands). Afterwords, the slum clearances destroyed even more. Between 1955 and 1985 about 1.5 million houses were demolished.

And who is to say that the post-war building programme was the normal, neutral level? Were family sizes shrinking? Was there a pre-war shortage that needed to be dealt with?

Whatever the truth of the matter, those statistics won't tell you.

A better way is to look at the dwellings per capita. This shows a steady increase in the number of houses available per person.

Of course, that is also an imperfect metric. For example, it includes subdivision (shrinking houses), but it ignores shrinking family sizes (the desire to live in smaller families may mean that more houses are needed for the same population).

None of this matters.

If the physical housing shortage were significant, it would be obvious, and it isn't. There would be no ambiguity and no need to fiddle the numbers.

It would have to be obvious, because it would have to be comparable in scale to the obvious, massive, increase in the number of landlords. The one that neatly coincides with the timing of the crisis.

For a significant number of people 'I can't afford to buy' means 'I am forced to rent', which means 'a landlord outbid me for the house I live in'. It doesn't mean 'I have no house'.

Year Dwellings Population Ratio

1961 16,626 52,800 3.18

1971 19,259 55,900 2.90

1980 21,423 56,300 2.63

1981 21,577 56,400 2.61

1982 21,739 56,300 2.59

1983 21,928 56,300 2.57

1984 22,127 56,400 2.55

1985 22,328 56,600 2.53

1986 22,537 56,700 2.52

1987 22,805 56,800 2.49

1988 23,046 56,900 2.47

1989 23,273 57,100 2.45

1990 23,511 57,200 2.43

1991 23,552 57,400 2.44

1992 23,770 57,600 2.42

1993 23,956 57,700 2.41

1994 24,146 57,900 2.40

1995 24,336 58,000 2.38

1996 24,539 58,200 2.37

1997 24,731 58,300 2.36

1998 24,922 58,500 2.35

1999 25,105 58,700 2.34

2000 25,319 58,900 2.33

2001 25,468 59,100 2.32

2002 25,636 59,400 2.32

2003 25,835 59,600 2.31

2004 26,042 60,000 2.30

2005 26,274 60,400 2.30

2006 26,516 60,800 2.29

2007 26,772 61,300 2.29

2008 27,047 61,800 2.28

2009 27,266 62,300 2.28

2010 27,448 62,800 2.29

2011 27,614 63,300 2.29

2012 27,767 63,700 2.29

2013 27,914 64,100 2.30

I wonder if the decline in dwellings per housing has anything to do with the increase in professional single parents - something that didn't used to possible of course. Obviously the tax payer subsidising more and more people to have free/close to free housing will increase the demand.

On the subject of the increase of the number of Landlords. Didn't the Wilsons start renting houses to pro single parents - paid for by us of course.

Edited April 27, 2015 by iamnumerate

[R K]

If you want higher relative interest rates and believe this will cause a house price crash then vote labour or libdem

If you want lower relative rates for longer & believe this will sustain house prices then vote Tory (or presumably even more so UKIP)

Oxford Economics ‏@OxfordEconomics 10m10 minutes ago

Lab minority govt likely. Less austere so offers stronger growth, higher int rates & £ #GE2015 http://www.oxfordeconomics.com/my-oxford/publications/298566 …

Edited April 27, 2015 by R K