tag:theconversation.com,2011:/global/topics/help-to-buy-7470/articles
Help to Buy – The Conversation
2019-11-26T12:42:12Z
tag:theconversation.com,2011:article/127576
2019-11-26T12:42:12Z
2019-11-26T12:42:12Z
Finally, most parties take the UK’s housing crisis seriously
<figure><img src="https://images.theconversation.com/files/303498/original/file-20191125-74599-12a9jzj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Goldsmith Street, a social housing development which won the 2019 RIBA Stirling prize for architecture.</span> <span class="attribution"><span class="source">© Tim Crocker</span></span></figcaption></figure><p>For more than 20 years we have been researching and writing about the downgrading of public housing in the UK. Thankfully, the tide finally appears to be turning. </p>
<p>Government failure can be seen most clearly in the form of <a href="https://theconversation.com/i-have-a-job-but-im-homeless-the-working-poor-who-cant-afford-to-rent-126445">homelessness</a>, but the problems are bigger – high prices, high rents, housing insecurity and its high toll on mental health, overcrowding, beds in sheds and so on. For decades, financial support for public housing <a href="https://www.housing.org.uk/how-public-money-is-spent-on-housing/">has been cut</a>. Politicians have referred to estates of public housing as <a href="https://www.theguardian.com/housing-network/2016/may/11/sink-estates-starved-funding-poverty-housing">“sink” areas</a>, marring the reputations of places and people.</p>
<p>While homelessness and rising prices and rents fill conversations about the housing problems of today, government action has focused on helping existing and new home owners. In the meantime, private landlords reap profits from an insecure, frequently poor quality and high cost sector. </p>
<p>But finally, several British political parties – Labour, the Green Party and Liberal Democrats – are offering evidence-based and convincing analyses of the problem and pledging to improve non-market housing provision. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/-rNPrQijYeQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>It is perhaps not surprising that recent decades have generated this new position on how to fix the broken housing system, where the state – local and central – takes a more active role. It is increasingly clear that the market, often lauded as the most efficient way of providing and allocating housing, is actually a <a href="https://www.theguardian.com/commentisfree/2018/oct/24/the-guardian-view-on-slumland-britain-a-housing-market-failure">key driver</a> of the failure to provide decent homes for many hundreds of thousands of households.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/thatcher-helped-people-to-buy-their-own-homes-but-the-poorest-paid-the-price-50133">Thatcher helped people to buy their own homes – but the poorest paid the price</a>
</strong>
</em>
</p>
<hr>
<h2>New homes</h2>
<p>So what are the parties offering at this stage? <a href="https://assets-global.website-files.com/5da42e2cae7ebd3f8bde353c/5dda924905da587992a064ba_Conservative%202019%20Manifesto.pdf">The Conservatives</a> focus on overseeing the construction of a million homes in the next five years. Social housing, it seems, will continue to be neglected under a Tory government.</p>
<p>Labour, meanwhile, have pledged to build <a href="https://www.theguardian.com/politics/2019/nov/20/labour-to-unveil-75bn-social-housing-plan-to-build-for-the-many">100,000 council homes</a> a year by 2024 for those most in need. It also wants to fund a further 50,000 homes a year to be built by Housing Associations who also target those needing a home and will put a stop to <a href="https://www.theguardian.com/society/2019/jan/19/ministers-urged-halt-right-buy-council-homes-rented">Right to Buy</a>: a scheme which has led to over 40% of former council homes now being rented out by private landlords.</p>
<p>The Liberal Democrats propose <a href="https://www.bbc.co.uk/news/election-2019-50459123">300,000</a> homes a year by 2024, to include 100,000 for social rent (by housing associations). <a href="https://www.bbc.co.uk/news/election-2019-50464641">The Greens</a> match the Lib Dems while stressing the need for zero-carbon homes.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/s--1w1PQeF8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">This social housing project won the Stirling Prize 2019.</span></figcaption>
</figure>
<p>The Conservatives stand out here, with their continued focus on offering public money to help aspirational owners rather than providing housing for those most in need. Their costly Help to Buy scheme, which they plan to extend, has <a href="https://www.ft.com/content/859ec6a0-dbc1-11e9-8f9b-77216ebe1f17">been widely criticised</a> for inflating prices, bolstering developer profits and doing nothing to help those in most need. The party’s election manifesto does not provide any details as to how it will increase the supply of social other than to state that “it will bring forward a social housing white paper”.</p>
<p>Talk of austerity, poverty and inequality may be tiring for some to keep hearing, but it is critical that we understand how bad things are for many people. Many older homeowners find it hard to understand the pressures of simply finding a place to live, let alone the ongoing challenge of funding that space, heating it or accessing it if disabled. Paying rent to help secure someone else’s retirement is particularly galling for many.</p>
<h2>A social system</h2>
<p>A system is needed that is designed for the needs of all people. <a href="https://www.theguardian.com/society/2019/jan/08/england-needs-3m-new-social-homes-by-2040-says-cross-party-report">Research</a> shows that yes, of course a regulated market in owned housing is needed (controls are needed to ensure it is high quality and built in the right places). But this needs to exist alongside a high quality, professionally managed public housing sector capable of helping people to find decent homes. Increasingly, the shortfall in supply has enabled private landlords to offer low income households <a href="https://www.theguardian.com/commentisfree/2019/jul/17/housing-britain-landlord-tenants">sub-standard properties</a>.</p>
<p>The argument that public housing does not work is locked in a vision of large-scale estates that became increasingly unpopular as funding has been drained from them. Most analysts today envision a for-life option (the ability of tenants to stay for as long as they like so that they can feel secure) at a cost that allows other areas of life to be better enjoyed (health, education, access to work). Only home ownership and public rented housing can provide these kinds of outcomes.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/303467/original/file-20191125-74593-1qi61hy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trellick Tower, a social housing masterpiece of brutalist architecture.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-september-28-2015-trellick-471796673?src=e49eb698-f682-4629-b728-9b4d591ab6cf-1-0">Claudio Divizia/Shutterstock.com</a></span>
</figcaption>
</figure>
<p>Whatever our personal politics, it is vital that we understand that powerful interests circulate to promote housing as a market commodity, rather than a critical social good to be enjoyed by all. The pathway to this vision is littered with the profits to private landlords and the shattered dreams of the homeless and ill-housed. </p>
<p>It is precisely not in the interests of market providers to resolve the housing crisis. This may sound like heresy, but it is the evidence of many years of <a href="https://housingevidence.ac.uk/wp-content/uploads/2019/02/190228-How-does-the-land-supply-system-affect-the-business-of-UK-speculative-housebuilding.pdf">analysis</a>.</p>
<h2>Hope for the future</h2>
<p>Looking to a future in which social housing forms a basis for social and economic investment offers genuinely thrilling prospects. There is no reason that a new council building programme cannot be enjoyed in partnership with private builders, and indeed using smaller companies, many of whom have been threatened or busted by the current crisis.</p>
<p>On the <a href="https://theconversation.com/labours-low-carbon-warm-homes-for-all-could-revolutionise-social-housing-experts-126329">environmental front</a>, social homes can be built or retrofitted to enhanced standards that are warm, safe, flood resistant and carbon neutral. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/labours-low-carbon-warm-homes-for-all-could-revolutionise-social-housing-experts-126329">Labour's low-carbon 'warm homes for all' could revolutionise social housing – experts</a>
</strong>
</em>
</p>
<hr>
<p>To say this will cost a lot of money is stating the obvious. But housing is a major component in the reproduction of wealth inequalities, private profiteering and carbon emissions (energy use in homes accounts <a href="https://www.theccc.org.uk/2019/02/21/uk-homes-unfit-for-the-challenges-of-climate-change-ccc-says/">for 14%</a> of the UK’s total). The fact that political attention is being focused more clearly on challenging these problems and getting traction on a home-building programme for citizens should be welcomed by all.</p>
<p>The housing crisis of today is an enduring problem, one that goes back more than a hundred years, when walking through the slums of the growing industrial metropolises, Friedrich Engels asked why more housing wasn’t provided when so many people were in need. The question today is, why are we still asking the same old question?</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p><em><a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKGE2019&utm_content=GEBannerB">Click here to subscribe to our newsletter if you believe this election should be all about the facts.</a></em></p><img src="https://counter.theconversation.com/content/127576/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
For decades, social housing has been defunded and ignored. The system is now broken, and it needs to be fixed.
Rowland Atkinson, Chair in Inclusive Societies, University of Sheffield
Keith Jacobs, Professor of Sociology and Director of the Housing and Community Research Unit, University of Tasmania
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/97218
2018-06-11T11:36:16Z
2018-06-11T11:36:16Z
Fixing the housing crisis: it’s time to challenge our thirst for more living space
<figure><img src="https://images.theconversation.com/files/222585/original/file-20180611-191981-1ju4kk6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Home alone.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-men-relaxing-floor-his-new-79916698">Heider Almeida</a></span></figcaption></figure><p>It’s hard to be optimistic about British homes in the future. The <a href="http://www.bbc.co.uk/news/uk-politics-43279177">lack of accommodation</a> and the “<a href="https://www.theguardian.com/business/2017/feb/07/housing-market-government-white-paper-sajid-javid">broken</a>” housing market are perpetually in the news. Millennials, even <a href="http://www.bbc.co.uk/news/business-43075099">middle earners</a>, are unlikely to own their own home. </p>
<p>The country’s new-builds <a href="https://www.telegraph.co.uk/finance/property/10909403/British-homes-are-the-smallest-in-Europe-study-finds.html">are the</a> smallest in Europe, <a href="https://www.theguardian.com/money/2017/feb/11/welcome-rabbit-hutch-britain-land-ever-shrinking-home">with families</a> “so cramped there isn’t enough space for them to live comfortably, sit down and eat together or even store necessities such as a vacuum cleaner”. As for the ageing population, the UK is <a href="https://publications.parliament.uk/pa/ld201213/ldselect/ldpublic/140/140.pdf">said to be</a>
“woefully underprepared” for offering them appropriate housing and care. </p>
<p>These woes are variously blamed on “<a href="http://www.bbc.co.uk/news/uk-politics-43279177">greedy developers</a>” or Margaret Thatcher’s <a href="https://www.theguardian.com/housing-network/2017/oct/11/housing-crisis-england-scrap-right-to-buy-help-to-buy">Right to Buy policy</a> for council houses. Many commentators <a href="http://www.bbc.co.uk/news/magazine-30776306">believe</a> we need to build around 240,000 homes a year to solve the problem, while praising government schemes to increase ownership, such as the <a href="https://www.helptobuy.gov.uk">Help to Buy</a> policy. </p>
<p>I want to argue for a different approach to making housing more viable. It focuses on a major cultural shift that has contributed to the housing problem, but too often gets overlooked. </p>
<p>Nearly one-third of the population <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/bulletins/familiesandhouseholds/2017">now live</a> on their own. <a href="https://www.palgrave.com/gb/book/9780230271920">Key demographic</a> changes, such as young people deferring marriage and children until later in life and older women outliving their spouses and living on their own, has resulted in the average UK household size <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/compendium/generallifestylesurvey/2013-03-07/chapter3householdsfamilesandpeoplegenerallifestylesurveyoverviewareportonthe2011generallifestylesurvey#household-size">falling from</a> almost three per household in 1970 to 2.4 for the past decade. This is part of why the number of households is rising, currently at <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/345141/uk_housing_fact_file_2013.pdf">about</a> 1% a year. </p>
<p><strong>UK household composition 1961-2011</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=347&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=347&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=347&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=436&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=436&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222554/original/file-20180611-191954-1gupafm.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=436&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/bulletins/populationandhouseholdestimatesfortheunitedkingdom/2011-03-21">ONS/Census</a></span>
</figcaption>
</figure>
<p>Accompanying these shifts have been changes in people’s expectations. Householders nowadays <a href="http://housingspacestandards.co.uk/assets/space-standards_onscreen.pdf">consider</a> a spare bedroom a necessity, while children are less likely to share a room with siblings than was once the case. Despite all the talk of “rabbit hutch homes”, domestic space per person is <a href="http://eprints.uwe.ac.uk/12281/2/Output_1_Space_per_person.pdf">actually increasing</a>. With this in mind, here are a couple of alternative responses to the housing crisis that begin to make sense: </p>
<h2>1. What we mean by family</h2>
<p>The <a href="https://www.goodreads.com/book/show/23848220-the-making-of-home">1850 British census</a> defined the family as “the wife, children, servants, relatives, visitors, and persons constantly or accidentally in the house”. This is an interesting reminder that past home life was much more communal than today. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222559/original/file-20180611-191951-1h4xab2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Our little brood.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/vintage-photo-family-russia-end-19th-62827723?src=fdE1yHWw4c6eKVDvwMf4zw-1-3">Kompaniets Taras</a></span>
</figcaption>
</figure>
<p>The UK government already incentivises renting to lodgers through its <a href="https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme">Rent a Room</a> scheme, offering homeowners up to £7,500 tax-free income per year <a href="https://www.theguardian.com/money/2015/jul/13/rent-out-your-spare-room">if they let space</a>. Taking a more creative approach to our perception of family and who we are willing to live with could make a big difference to the housing crisis. It would also be good for our wallets, not to mention <a href="https://www.theguardian.com/money/2012/jan/06/homeshare-scheme-tackle-housing-crisis">wellbeing</a>, helping people with loneliness and filling empty nests. </p>
<h2>2. Honey, I shrunk the house</h2>
<p>While the <a href="https://theconversation.com/australians-love-tiny-houses-so-why-arent-more-of-us-living-in-them-44230">tiny house movement</a> is becoming known for freeing people from mortgages and giving them more time to do what they love, this does not mean everyone needs to <a href="https://theconversation.com/tiny-houses-the-big-idea-that-could-take-some-heat-out-of-the-housing-crisis-77295">move into</a> a 25 square metre home. Just downsizing from a large family house once you reach a certain age would help address our “<a href="https://theconversation.com/the-world-needs-to-build-more-than-two-billion-new-homes-over-the-next-80-years-91794">ticking household bomb</a>”. </p>
<p>The trouble is that people’s willingness to move house <a href="https://www.ncbi.nlm.nih.gov/pubmed/18657099">declines drastically</a> after the age of 45 as they become more attached to their homes and wider community. Older householders often only move when they <a href="https://www.stir.ac.uk/research/hub/publication/19945">are forced</a> by factors such as injury, illness or the death of their partner. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222556/original/file-20180611-191981-305cer.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Rethink required.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/0yfWDwHOB0g">Jelle Harmen van Mourik</a></span>
</figcaption>
</figure>
<p>To combat this, organisations such as <a href="https://upsideofdownsizing.com">this one</a> in the US, where there is a similar debate taking place, are already working to put a positive spin on downsizing and to market “<a href="https://www.theguardian.com/cities/2017/may/31/downsizer-homes-last-stab-baby-boomers-gentrification-london">downsizer homes</a>” to people of a certain age. If we want to do something about the housing crisis, putting more emphasis on the upside of downsizing cannot be understated. </p>
<h2>3. Time for substitutions</h2>
<p><a href="https://www.tandfonline.com/doi/abs/10.1080/09613218.2017.1410375">My research</a> compares experiences of living in different sizes of house and household, and what motivates them. People expect more space for different reasons. Sometimes it makes it easier to enjoy living with your family members: more bathrooms per household reduces the potential for conflicts over who’s next in the shower, for instance. Or it may be because people have become accustomed to having a bedroom or study where they can do what they want and retreat from the company of others.</p>
<p>We need to play up the counterarguments: why is bigger always better, for example, when we know it often locks us into unaffordable mortgages and more housework and gardening? </p>
<p>We also need to encourage people to accommodate these desires in different ways. Soundproofing walls can create a better sense of privacy than having more rooms. Sofa beds can create temporary guest bedrooms that need not be empty for the majority of the year. </p>
<p>The answer to the housing crisis is not to build vast numbers of new homes and help people to own more space than they need. Instead, we need to make do with less and learn to appreciate it.</p><img src="https://counter.theconversation.com/content/97218/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katherine Ellsworth-Krebs does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
More homes, more homes, more homes. What about less elbow room instead?
Katherine Ellsworth-Krebs, Lecturer in Sustainable Development, University of St Andrews
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/62002
2016-07-07T13:28:29Z
2016-07-07T13:28:29Z
Property fears after Brexit vote are a sign of wider UK housing problems
<figure><img src="https://images.theconversation.com/files/129597/original/image-20160706-12717-tpje4u.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C1600%2C1061&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Ghosts in the machine: housing and commercial property are battling headwinds.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/daviddelam/15464776277/in/photolist-pyz2cK-kcXru-pNUEo5-5kTNYv-4zbqeN-pR1eAV-9hifcF-cUYaNo-DonUQ-522mZj-8CkKJr-8CoPyY-8CowNy-8GkQ2Q-9cH8WD-w9ocBL-8CkwX6-nqeh3n-7SDije-rzeKUL-agV71g-nqegpi-9EcGHe-sMMUrW-71BS5V-HViAhR-5kTQfc-dXZZ7L-5kY9e7-5kTRaZ-5kY8ou-q7t1g-aeXRhX-8CoUn3-8XvPAN-sJMkc5-8CkfN4-6HwBjz-9d79uY-7HbCzK-aERkpH-83z66m-nGqW7x-H8nQ2U-pjZ3CY-rr4bkB-aAqfTt-9Y3riV-8CoUe7-9RTMmi">David de la Mano/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Immediately after the UK voted to leave the European Union, a number of lead economic indicators went into reverse. Notable among them were housing, property and real estate shares that fell sharply both in the housebuilding sector and among banks with <a href="http://www.bloomberg.com/news/articles/2016-07-04/u-k-construction-contracts-at-fastest-pace-since-2009-on-brexit-iq7sp5cn">large property lending exposure</a>. This was seen as a simple response to economic uncertainty; fears emerged of falling house prices and <a href="http://www.scotsman.com/business/markets-economy/builders-confidence-crumbles-following-eu-vote-1-4165395">slowing activity in the property market</a>. </p>
<p>This week the big story has been the weakening position of major real estate funds, primarily investing in commercial property – office buildings, shops, warehouses. The firms which manage the funds, <a href="http://www.bbc.co.uk/news/business-36726695">Standard Life for example</a>, are concerned that if investors rush to withdraw their money, there will be insufficient capital to repay them. At first, <a href="http://www.bbc.co.uk/news/business-36708851">a number of funds</a> reduced the amount that investors could get back. Now, <a href="https://www.theguardian.com/business/live/2016/jul/06/brexit-fears-pound-slides-stock-markets-business-live">at least six of them</a> – including Standard Life, Aviva and M&G – have suspended trading altogether. This has not happened since the global financial crisis.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=522&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=522&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129595/original/image-20160706-12703-jj8a13.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=522&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Commercial property is in the firing line.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/10515323@N08/24148367060/in/photolist-dPQYwP-5zWuwt-5Zhrkj-D7Yy9-7YpeDi-5MGMBZ-34GuRC-diGV8e-DMAuK3-7YswEN-9beYLn-dPyXMq-8J6sN2-5VCUfU-diGSZS-8J9zoq-5CVVYD-5QYkb6-5HfRGt-5CVWov-8zbnPb-5QYFKi-7YoWPk-dbxFcP-6PLkuT-2PvzPi-akzQqP-CMUGdd-4Kv57X-diGT2G-5pp5up-6FLRLz-aYPmRM-5sPVnZ-rgSvA-D58TBq-diGV34-D5ssPw-diGT7w-7Yp33g-diGUXg-iG4Ed-neJBbZ-sWGLjP-sdGCoo-noSwo7-rszBUn-nn6Zt9-ogyrE9-fscKC4">Hazel Nicholson/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>While it reflects the basic illiquidity of commercial property compared to the short-term needs of worried investors – it clearly speaks to a much more profound concern about the economy and the exposure to housing and property.</p>
<p>Most of us are not heavily exposed to property funds, but many of us are homeowners or hope to be. The risk of falling house prices in the post-referendum environment may threaten highly leveraged mortgages where home owners have taken on lots of debt. The most immediate risk is of “negative equity”, when the value of the house is lower than the loan amount outstanding. </p>
<p>Normally, such “underwater” loans prevent people moving home, but in the absence of repayment difficulties they are not an immediate problem. You just have to wait it out until prices turn. However, the current situation is complicated and potentially more worrying. </p>
<p>This is because of the government’s £31 billion commitment to various <a href="http://www.insidehousing.co.uk/owning-the-future/7015857.blog">Help-to-Buy schemes</a>, £12 billion of which in effect guarantees the exposed part of mortgage loans should prices fall. A sustained price fall which becomes associated with increased defaults on mortgages could mean the government has to make good those guarantees after repossessions on affected properties. </p>
<h2>Taking a pounding</h2>
<p>Falling house prices in the short run will also reduce existing owners’ capacity to support potential first time buyers: <a href="https://www.theguardian.com/business/2016/may/03/parental-help-behind-25-percent-of-uk-mortgages-bank-of-mum-and-day">the bank of mum and dad</a> (or granny and grandad) stepping in to help. This will further reduce access to home ownership because younger households increasingly face unaffordable deposit demands before they can get a mortgage. At the moment, access to the levels of cash needed often depends on rather arbitrary good fortune, timing and location. It often boils down to whether your family have the means to lend or give you what’s needed. </p>
<p>Much has been made of the high level of speculation and overseas investment in London’s vertiginous housing market. There <a href="http://www.telegraph.co.uk/business/2016/07/07/property-boss-warns-of-weakening-london-market/">were already signs</a> that the market was weakening cyclically prior to the referendum. Subsequently, however, we saw last week that some foreign banks were refusing to lend to their nationals for property investment in the UK. The depreciation of sterling may be encouraging such purchasers into the market, but only if they can <a href="https://www.theguardian.com/money/2016/jul/07/overseas-buyers-keen-to-exploit-weak-pound-to-buy-london-homes?utm_source=twitterfeed&utm_medium=twitter">find the means to borrow</a>. </p>
<p>In this way we see that a UK housing market dominated by an open, world city in London, does become linked to currency movements and international capital flows, despite the fundamentally local nature of housing and real estate. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=288&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=288&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=288&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=362&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=362&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129599/original/image-20160706-12739-k8n8ih.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=362&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">No more happy hunting ground?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/davidedamico/16798545576/in/photolist-rAqWm9-pieVPf-dupH63-pvE4t7-bmG3k2-62bFh6-jYKwFB-fNBS59-dG8jc4-95VPVJ-aH91nK-9qqwcy-dtSMYw-95EA2e-qjF6x6-dAAC4w-jfR4n8-htQNua-q7GuZk-dn2gKd-dn2eAU-dn2eKK-ajfZJe-AHsDdj-rdahdM-dmQtNV-dn2gUq-dXbAR1-5AphH8-5K9giz-awee3B-5Atv7S-dn2bYB-C7ezHN-8YZyHW-5Apd4i-e1UGf3-qSvJvr-9dGH2b-fWmX4L-95FBiP-9iWg4w-3f415V-AbHDDQ-zAcLpL-AB8S3L-4h9Gmo-r562zD-ajiMsL-9XhTu">Davide D'Amico/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>Home to roost</h2>
<p>Falls in share prices, the forced intervention in real estate funds and worries about lending and government exposure to the downside of help-to-buy guarantees explain why the <a href="http://www.bbc.co.uk/news/business-36712040">Bank of England says</a> that the Brexit risks are crystalising and is moving to do something about it. However, it is hard not to draw the conclusion that the red flags going up across the housing and banking sectors reflect the underlying or chronic problems we know beset the housing market in Britain:</p>
<p>• Market imperfections in the form of the long term inability to build in sufficient numbers to address growing housing demand.</p>
<p>• Dwindling public investment in social and affordable housing in a period of high and rising housing need.</p>
<p>• Tax raids on the private rental market by targeting buy-to-let investors just when they are <a href="https://kengibb.wordpress.com/2016/03/19/three-tax-strikes-and-you-are-out/">playing a critical role</a> by filling the gap between the market and the non-market sectors.</p>
<p>• Tighter mortgage lending in the <a href="https://www.theguardian.com/money/2014/apr/25/mortgage-rules-homebuyers-fca-rules">wake of the mortgage review</a> that sought to reduce future lending risks after the global financial crisis. </p>
<p>• Privileged tax advantages <a href="https://www.theguardian.com/business/economics-blog/2015/sep/25/housing-bill-needs-radical-long-term-reform-market-buy-to-let">to home owners</a> which lock them in and create a society of insiders and outsiders. This worsens intergenerational inequalities and crowds out other forms of more productive business investment</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/129690/original/image-20160707-30676-1l2udoi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Broken system.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/ben_salter/4078312254/in/photolist-7doq9w-7uDmrV-adZSsy-cijEhN-mQmhtr-7A63AS-kuQaC6-89ztVP-cuCand-8eDg95-chy1US-uoZ8R-8kth7m-qGYJnu-euaU8x-kuL2xK-hds5Gh-kuMT2e-kuQMPn-nv33Bq-demdNt-hdscYd-sDeeE-7oJS9i-6s3BPr-kuQPzr-6Ya6wF-brMdTu-9jaxbB-5YnJTa-bWB91z-bWB4M6-8TBB8c-cdYmS3-cdYvEb-cdYrrm-ekHyoS-ebccY9-cdYuAs-9d4r17-7uzZGi-5YnKjz-9tybiS-bWB97H-kuQjVp-jYQKna-bWB8p8-bWB2Vk-sDgXv-cdYveA">Ben Salter/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Combining these points helps explain the underlying volatility in the housing market. It allows prices and market volumes to fluctuate more than the economy as a whole, while long-term real house price inflation encourages speculation in property assets and serves to frustrate people’s housing and labour mobility choices.</p>
<p>Governments and opposition parties must take concerted long-term action to normalise housing as an asset and a commodity. The policy world must recognise the need to approach housing more constructively, treating it as an entire system win which housing consumption rather than tenure matters most.</p>
<p>Frankly, we must seek to bring an end to a culture where politics is premised on defending existing asset owners’ housing capital rather than providing sufficient housing in the right places at prices and rents ordinary people can manage at different life-cycle stages. If not, we will be condemned to repeat these crises periodically, alongside slowly worsening chronic problems of exclusion, non-affordability and poisonous widening inequality.</p><img src="https://counter.theconversation.com/content/62002/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kenneth Gibb receives funding from ESRC, AHURI, Shelter Scotland and Choice Housing Group. He is a board member of Sanctuary Scotland housing association and a trustee of the Urban Studies Foundation.</span></em></p>
Brexit worries have shaken the professional end of the sector, but Britain’s troubles have run far deeper for far longer.
Kenneth Gibb, Professor of Housing Economics, University of Glasgow
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/39031
2015-03-19T14:23:26Z
2015-03-19T14:23:26Z
Help-to-Buy ISAs will end up feathering nests of the wealthy – here’s how
<figure><img src="https://images.theconversation.com/files/75355/original/image-20150319-1572-1z0hxcy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Feeding the beast?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/digallagher/4880157508/in/photolist-8rf5NG-8RpBYb-5JTVeX-6DcQP2-8cqs9Q-6qm7Gh-4kNsB-96Ja9e-aYMUqk-dyhzLH-aPmLt-4yVHP-52WAqX-9kbkpY-7b4LP1-6G883i-8F83cb-GQytd-74ZGVm-8cqs8N-aDHEMV-qqk37f-eb4fN-5Yznk1-iQncn8-HbMUi-ioLNnZ-9ECD9b-9EzJzR-qfutr5-bk7FuR-h6zBJY-5ZfE8s-5LFa6J-bHad8i-4pFNC4-pTTcbp-e8vn4f-p3GFvy-7vqv6h-3MZqB-79DhKv-5Yiw7d-3wuW2D-3wuYkv-4qwcwr-7JFN2u-3Mwevx-6ux3F6-dnkHi">Diana Parkhouse</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>George Osborne’s bid to boost home ownership in Britain might look like an effort to give young people a leg-up onto the housing ladder, but the evidence suggests they will be sorely disappointed. The <a href="https://theconversation.com/uk/topics/uk-budget-2015">Chancellor of the Exchequer’s budget</a> unveiled a new “Help-to-Buy ISA” savings account which will subsidise deposits for first-time buyers while leaving untouched the fundamental flaws at the heart of our growing housing crisis.</p>
<p>The <a href="http://www.independent.co.uk/money/mortgages/help-to-buy-isa-qa-are-they-real-help-for-firsttime-buyers-or-simply-a-votewinner-for-the-2020-election-10118723.html">new ISA savings accounts</a> will be available through banks and building societies from this autumn. In a nutshell, the government will add £50 to every £200 which savers manage to put away towards the deposit. First time buyers can make an initial deposit of up to £1,000 when opening the account. The total subsidy to first time buyers is capped at £3,000. It can be used by first time buyers to purchase homes priced up to £450,000 in London and £250,000 elsewhere. </p>
<p>The new policy is similar in spirit to the <a href="https://www.gov.uk/government/policies/helping-people-to-buy-a-home/supporting-pages/help-for-first-time-buyers">various predecessor Help-to-Buy schemes</a>. The Help-to-Buy policy has been described by commentators as the biggest government intervention in the housing market since the <a href="http://www.politics.co.uk/reference/right-to-buy">Right-to-Buy scheme of the 1980s</a>. But Help-to-Buy and, in particular, the new Help-to-Buy ISA are not a good idea. They are unlikely to help first time buyers achieve their dream of home ownership.</p>
<h2>Why it won’t work</h2>
<p>The new ISA is intended to stimulate housing demand from first time buyers. This should translate – in theory at least – into new housing being supplied and higher home ownership. </p>
<p>However, evidence from the US suggests that there is <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2375853">only a very weak link at best</a> between housing subsidies and improved home ownership levels. In fact, in tightly regulated housing markets in the US (where there is inflexible supply), the subsidies have a negative effect on home ownership because the price effect – through increased demand – more than offsets the income effect from the subsidy. In less regulated US markets (with flexible supply), subsidies do have a positive effect on home-ownership rates, but only for higher income groups. </p>
<p>The trouble, from the UK perspective, is that <a href="http://www.ayrshire-jsu.gov.uk/download/review%20of%20housing%20supply%20-%20interim.pdf">long standing evidence</a> that I have <a href="http://www.spatialeconomics.ac.uk/textonly/SERC/publications/download/sercdp0119.pdf">recently considered in research</a> with <a href="http://www.cpb.nl/en/medewerkers/wouter-vermeulen">Wouter Vermeulen</a> suggests that the UK has an extraordinarily inflexible planning system. This makes housing supply incredibly unresponsive to demand shocks and acts to push up house prices. This effect is most pronounced for London and the South East, where planning regulations are tightest. In other words, stimulation of demand by a Help-to-Buy ISA has the likely effect of driving up house prices, especially in London and the South East, while having no positive effect on construction or ownership.</p>
<h2>A busted building boom</h2>
<p>Consistent with this idea, <a href="http://www.nationwide.co.uk/%7E/media/MainSite/documents/about/house-price-index/Q2_2014.pdf">according to Nationwide</a>, house prices in London increased by 25.8% in the year following the announcement and subsequent implementation of the original Help-to-Buy scheme, from the second quarter of 2013 to the same period in 2014.</p>
<p>A residential building boom failed to emerge. To the contrary, housing construction is currently at record lows. According to <a href="https://www.gov.uk/government/collections/house-building-statistics">statistics from the Department for Communities and Local Government</a>, the UK built close to 380,000 new homes in the fiscal year of 1969/70 (when statistics began). Housing construction gradually declined towards a record low in 2012-13 of less than 135,510 new homes. In 2013-14 figures were slightly higher at 140,930 new homes, but this reflects the typical increase associated with an economic recovery rather than a building boom induced by Help-to-Buy. The UK homeownership rate has been <a href="http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/a-century-of-home-ownership-and-renting-in-england-and-wales/short-story-on-housing.html">in decline since the turn of the millennium</a>, falling from 69% in 2001 to 64% in 2014.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/75362/original/image-20150319-1572-1shcmet.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Brick by brick.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jvk/19081705/in/photolist-5nR65u-6b4bao-9h5jXj-mpcssV-8mYPf-zVWZ-oTSHg9-5VMSZy-h7UsJM-ahJSZo-vGnop-8Q2Saq-2FNjV-6crG7P-5nR7pQ-5c3rRw-5nMv9V-btKCWB-aoBXPC-25217m-44r4Hs-84EbAS-ccyvTQ-q9GQov-h2YiAk-9wCSYb-5ZeVJC-xd4E-jA9q5y-8hqH13-pmWTEX-9h5kES-4fsSbN-a73cX-CnPfH-hp2j2t-8ddhtK-6ydtd-fiH3k1-o5Uvwb-ffBh8q-nryTNc-nrhK6w-jAotCC-2HFGgH-aY3xE-bP3Q2n-5Z6Jv9-q9GQ1B-6p7QUx">John Keogh</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>With all likelihood the Help-to-Buy ISA scheme will have similar – if perhaps weaker – stimulating effects on housing demand and prices. The positive effect on house prices may be particularly pronounced in London and the south east and for starter homes. However, it is important to note that since starter homes, “trade-up” homes and private rental homes are all reasonably close substitutes, house prices and private rents are likely to increase across the spectrum. </p>
<h2>No Spain, no gain</h2>
<p>In fact <a href="https://ideas.repec.org/p/ces/ceswps/_470.html">research by François Ortalo-Magné and Sven Rady</a> for both the UK and the US suggests that due to “trickle-up effects”, capital gains on starter homes incurred by credit-constrained owners can lead to a housing price overreaction, with prices of trade-up homes displaying the most volatility. As a consequence of all this, it is highly likely that first time buyers are no better off. In fact they may be worse off for two reasons. First, as tax payers they help finance the subsidies. Second, the increased prices of starter homes may mean that first time buyers can no longer reach the <a href="http://www.bankofengland.co.uk/pra/Documents/publications/ps/2014/ps914.pdf">loan-to-income ratios</a> recommended by the Bank of England and thus are priced out.</p>
<p>So who benefits from housing subsidies such as the Help-to-Buy ISA? Almost certainly it is not young first-time buyers, or even younger existing homeowners who will find trade-up homes for expanding families are further out of reach. Instead, because the subsidy likely increases house prices and private rents across the housing spectrum, the main winners may in fact be <a href="https://theconversation.com/rise-of-generation-rentier-with-buy-to-let-property-shaping-up-as-new-annuity-for-pensioners-25294">wealthy buy-to-let owners and older homeowners</a>, especially those thinking about downsizing or moving to countries where housing is comparably affordable. In short, the policy may in fact subsidise wealthy owners of multiple or expensive properties and retirees who sell-up for a move to Spain.</p>
<p>Any political party that is serious about solving the British housing crisis should address the rout-cause of the problem, which is the broken British planning system. The proposed Help-to-Buy ISA not only is likely ineffective in raising home ownership, it also likely has undesirable redistributive effects, and, perhaps worst of all, worsens the ongoing housing affordability crisis.</p><img src="https://counter.theconversation.com/content/39031/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christian Hilber has received funding in the past from the National Housing and Planning Advice Unit to conduct research. He is one of the co-applicants of the Spatial Economics Research Centre, which has received funding from the Economic and Social Research Council.
</span></em></p>
George Osborne’s bid to boost home ownership in Britain might look like an effort to give young people a leg-up onto the housing ladder, but the evidence suggests they will be sorely disappointed.
Christian Hilber, Associate Professor of Economic Geography (Reader), Director of MSc in Real Estate Economics and Finance, London School of Economics and Political Science
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/19566
2013-10-25T13:39:19Z
2013-10-25T13:39:19Z
Growth based on consumption is only short-term relief
<figure><img src="https://images.theconversation.com/files/33815/original/73v3vvv6-1382708038.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Green shoots don't become tall trees without long-term nurture.</span> <span class="attribution"><span class="source">Skotkin</span></span></figcaption></figure><p><a href="http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product--preliminary-estimate/q3-2013/stb-gdp-preliminary-estimate--q3-2013.html">The Office for National Statistics</a> has issued the welcome news that UK GDP rose 0.8% from July to September this year. This is the fastest rate of increase in the past three years and is the third consecutive quarter of growth.</p>
<p>But before we heave a sigh of relief and conclude that the UK is on the mend for the long term, we should look at what this growth is actually based on. We have to remember that GDP is still about 2.5% below its pre-crisis peak. So we’re still producing and consuming less as a nation than we did five years ago. </p>
<p>There is also a big question about how balanced and sustainable this growth is. Long-term growth can only be sustained if it is underpinned by investment and export growth. While today’s figures appear to indicate recovery, there is little evidence that the economy is being rebalanced towards these areas.</p>
<p>When the figures are broken down by sector, they show that there was a 2.3% growth in construction - reflecting a buoyant housing market - compared with a much smaller, 0.5% increase in production, which includes manufacturing, showing that the supply side of the economy remains weak and the GDP figures are largely driven by increases in household demand.</p>
<p>The most obvious conclusion to be drawn from the headline GDP figure, therefore, is that growth is again being driven by household demand for goods and services - consumption, underpinned by an increasingly buoyant housing market and easier access to credit. This sounds some of the same alarm bells that were last heard just before the global financial crisis.</p>
<p>The government’s <a href="https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-equity-loans">Help to Buy</a> and <a href="https://www.gov.uk/government/policies/making-it-easier-to-set-up-and-grow-a-business--6/supporting-pages/getting-banks-lending">Funding for Lending</a> schemes are both aimed at kick-starting the economy by helping first time buyers get on the property ladder and making it easier for businesses to access finance but after the initial benefit, they could lead to difficulties. Help to Buy for example can only be further inflating house prices as demand for housing goes up and increases in housing supply remain limited, especially in the short run. </p>
<p>There is therefore a real risk that this GDP growth will rapidly lead to inflation, especially if worker productivity (the amount produced per worker) does not improve. On the other hand, if productivity does improve this will jeopardise the creation of more jobs. Again, long-term growth underpinned by investment and exports would be the only way to guarantee a sustainable reduction in unemployment as we create jobs by expanding the productive capacity of the economy and selling our output abroad.</p>
<p>The headline GDP figures for the UK as a whole are also somewhat misleading if we look at how growth is spread around the country. <a href="http://www.wbs.ac.uk/news/uk-productivity-gap-is-at-its-biggest-in-the-north-east/">Figures produced at Warwick Business School</a> show that there is considerable regional disparity in economic recovery. Just as we as can be seen with house prices, London and the South East are recovering more rapidly than the struggling North East and Yorkshire, for example, with growth in output in the East and West Midlands somewhere in between.</p>
<p>So while our third quarter of growth is good news in some respects, we would be wise to think about the long-term implications of our reliance on consumption, our neglect of the regions as participants in recovery and the high-profile government schemes that offer short-term demand stimulus rather than long-term supply side growth.</p><img src="https://counter.theconversation.com/content/19566/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Taylor has received funding via the UK research councils.</span></em></p>
The Office for National Statistics has issued the welcome news that UK GDP rose 0.8% from July to September this year. This is the fastest rate of increase in the past three years and is the third consecutive…
Mark Taylor, Dean of Warwick Business School and Professor of Finance, Warwick Business School, University of Warwick
Licensed as Creative Commons – attribution, no derivatives.
tag:theconversation.com,2011:article/19010
2013-10-09T13:39:19Z
2013-10-09T13:39:19Z
Help to Buy is a problem for UK banks, by default
<figure><img src="https://images.theconversation.com/files/32673/original/59w7bz9q-1381270995.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">I say, look at the size of this larder.</span> <span class="attribution"><span class="source">Oli Scarff/PA</span></span></figcaption></figure><p>Mortgage rates for the government’s Help to Buy scheme were <a href="http://www.bbc.co.uk/news/business-24430010">announced yesterday</a> amid the usual torrent of criticism for a policy that has very few friends. One Daily Telegraph commentator deemed the policy “<a href="http://blogs.telegraph.co.uk/news/iainmartin1/100238656/help-to-buy-is-nuts/">nuts</a>”, another in the Financial Times has called it “<a href="http://www.ft.com/cms/s/0/1b0cbc58-2b5e-11e3-bfe2-00144feab7de.html?siteedition=uk#axzz2h3500TeX">grotesque</a>”.</p>
<p>Indeed, even the banks, normally so close to George Osborne on policy matters, seem to be slightly reticent. Until yesterday only Lloyds and RBS - both publicly owned - had signed up for the scheme. HSBC, Virgin Money and Aldermore have now joined but nonetheless the banks’ enthusiasm for the scheme has been distinctly <a href="http://www.theguardian.com/business/nils-pratley-on-finance/2013/oct/08/banks-reluctant-help-to-buy-osborne">underwhelming</a>.</p>
<p>Banks are right to be worried by Help to Buy, and those of us outside the financial sector should be worried too. Indeed, it seems the height of irony that not long after an extensive parliamentary report <a href="http://theconversation.com/banking-report-suggests-a-cure-for-stupidity-epidemic-15328">recommended ways to make banks safer</a>, the government is pushing through a policy that is likely to do just the opposite.</p>
<p>Help to Buy may make home ownership more accessible to first-time buyers with a small deposit. But it comes with a big hidden price tag: mortgage defaults, and banking instability.</p>
<p>Research suggests that the number one driver of mortgage default is the <a href="http://cec.shfc.edu.cn/download/20100831155131_952278859865.pdf">loan-to-value ratio of the mortgage</a>. This means if the government is willing to increase the loan-to-value ratio of mortgages, then they also need to expect there will be an increasing number of people who default on their mortgages. So the policy might help people in home ownership, but it will also help them into unmanageable debt.</p>
<p>An increase in mortgage defaults will not just have an impact on homeowners themselves – it will affect the banks as well. When individuals default on their mortgages, the value of the assets held on a banks balance sheet deteriorate. This <a href="http://www-rcf.usc.edu/%7Eydeng/papers/rsue26_3-4.pdf">risk of default is a significant cost</a> to the institution that needs to bare it.</p>
<p>In fact the high number of defaults on home loans was one of the central factors behind the collapse of many of the UK’s banks during the financial crisis. Flooding the market with risky loans is likely to pose a significant problem to the big banks – and as we know from past experience, this is a risk not just shouldered by investors, but also by the tax-payer. </p>
<p>As well as making banks riskier, the policy could slow down the whole economy. If these loans were used to buy new houses, it would have stoked the economy through encouraging home building. But using government subsidised loans to buy old housing stock will do nothing for the broader economy. Nor will it help to expand the pitiful housing stock in the UK. The only industries to benefit will be estate agents and solicitors. </p>
<p>Clear winners from this policy will be people who already own homes. They will find the <a href="http://blogs.lse.ac.uk/politicsandpolicy/archives/34388">price of their home increases</a>. This is particularly good if you are older, thinking about downsizing and maybe moving to Spain to enjoy the sun. But if you are young family looking at expanding, housing will be more expensive. And if you are a first-time buyer, you will be able to borrow more, but you have to pay more. </p>
<p>The Help to Buy scheme might seem like a good idea on the surface, but even just a moment of thought shows it will create more problems than it solves. In the short term, the policy will solve the problem of first time buyers with access to home ownership. In the longer term, it is likely to fuel a housing bubble, increase mortgage defaults, further weaken bank balance sheets – and even act as a hand-brake on economic growth. </p>
<p>Help to Buy is a sign that the government has learnt nothing from the financial crisis.</p><img src="https://counter.theconversation.com/content/19010/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>
Mortgage rates for the government’s Help to Buy scheme were announced yesterday amid the usual torrent of criticism for a policy that has very few friends. One Daily Telegraph commentator deemed the policy…
Andre Spicer, Professor of Organisational Behaviour, Cass Business School, City, University of London
Licensed as Creative Commons – attribution, no derivatives.