Good Toynbee article

Graham_Devon

If you ignore the obvious political bias...

This week's Shelter report found average private rents were now beyond the reach of ordinary working families in 55% of English authorities, costing well over a third of their income, while energy prices rocket too. With mortgages unavailable and deposits too high, there are one million more private tenants than five years ago. (Jon Snow found some renting half-sheds for £40 a week). Households renting privately are overtaking the number of social tenants. Private tenants live an insecure life, where after an initial lease of six months, anyone can be evicted at two months' notice and rents can rise by any amount. This is no life for families, at constant risk of removal from schools and jobs. Shelter, Crisis and Labour's shadow housing minister, Jack Dromey, are calling for secure tenancies of three to five years, as in most of Europe, so that rents rise by no more than inflation during that lease.

Prices are falling slightly, a good thing for many, but if they fell far and fast, homeowners in negative equity would spiral: three million will struggle to pay their mortgages if interest rates rise by 2%, which they will. As prices fall, developers are even less inclined to build; institutional investors less willing to invest in building for sale or rent. Developers sit on gigantic land banks worth less than the price paid, so they build nothing, hoping prices will rise. What about capping private rents? In some areas renting costs more than a mortgage – if only mortgages were on offer. However, even if rents are painfully high for tenants, they are still not a high enough return on investment to entice pension funds into the rented sector to build, build, build all the homes needed.

The full article is well worth a read. She has her finger on the pulse, just sadly, it's full of needless political bias, as for everything she has a pop at the government for, the last government did exactly the same.

Basically she's saying everything is going up and nothing it being done about it.

http://www.guardian.co.uk/commentisfree/2011/oct/14/cathy-come-home-lesson-rents-mortgages

WestonDave

The 6 months tenancy thing is a bit overstated - a lot of it could be removed by outlawing agents charging a renewal fee to existing tenants staying on - tends to get them to unnecessarily send out new contracts rather than letting them go periodic. Most sensible landlords won't kick out a good tenant and go to all the risk and expense of finding a new one, just for a few % extra on the rent.

Five year tenancies would presumably have to be binding on both sides which doesn't necessarily help tenants wanting to move or ones stuck with useless landlords! The flexibility of the current system does work both ways.

Really2

As prices fall, developers are even less inclined to build; institutional investors less willing to invest in building for sale or rent. Developers sit on gigantic land banks worth less than the price paid, so they build nothing, hoping prices will rise

A fair few of us have mentioned this in the past.
When prices crash, less get built and fewer can own as less invest and lend.

That is why virtual nominal stagnation would allow more to own and would see building at least continue.

That is why stabalising the housing market is fairly important to all.

CLAPTON

we need to build more houses

we need to change the planning rules to allow more houses to be build where there is demand

we need to drop the rediculous rules about 'affordable' housing and actually start building more

the land banks being overpriced does not stop house building; it's the problem that for every 100 houses built, 30 have to be 'affordable' which means they have to be subsidised by the price of the the other 70 .. which makes the other 70 too expensive.
if we want 'affordable' housing it should be subsidised by the state and not other new build house buyers... not a point Toynbee seems to recognise

WestonDave

Interesting point about cross subsidy Clapton - major development going on in the centre of Bath at present - 2000 homes going up, long delays because the financial crisis threatened its viability. Most of it is going to be apartments with the usual affordable housing quotas with some houses on the fringe. They've recently put a row of 11 townhouses on the market - 3 beds for £650k and 4 beds for £800k - the difference being an extra floor on the 4 beds, otherwise they are identical 30foot by 15 foot footprint houses with a similar sized garden. In other words they are horrible little boxes with the only two positives being central location and new build so no wear and tear. They are way beyond local prices for similar numbers of rooms, but as you say they need to make a shedload on these to pay for the affordable housing. (To put the prices in context a 1950's 4 bed (over the road from us) a mile from the centre sold within a week for £450k - nice solid house, nice garden, nice area - why would anyone pay £800k for a worse house?)

Rochdale_Pioneers

Why have rules had to be imposed about building affordable housing? Beause too little was getting built. Developers looked to where the action was in the growing market, realised if they built lots of flats for BTL they'd get a quick return, and off they went. We need affordable housing quotas because otherwise there won't be any.

But I like the idea of state subsidised. Here's an idea. We could let local authorities look after the housing requirements in their borough, building, owning and maintaining affordable housing which could be rented or part owned as they see fit. We could call them "council houses".

CLAPTON

Rochdale_Pioneers wrote: »

Why have rules had to be imposed about building affordable housing? Beause too little was getting built. Developers looked to where the action was in the growing market, realised if they built lots of flats for BTL they'd get a quick return, and off they went. We need affordable housing quotas because otherwise there won't be any.

But I like the idea of state subsidised. Here's an idea. We could let local authorities look after the housing requirements in their borough, building, owning and maintaining affordable housing which could be rented or part owned as they see fit. We could call them "council houses".

the rules on affordable housing were imposed because it sounded good in parliament; Preston didn't happen to mention the cost would be on other (often poor first time buyers)
the result was
a. fewer houses overall being built
b. fewer 'affordable' house being built
a lose lose scenerio
but true we got a lot of city centre tiny flats that were of course totally unsuitable for families wheter poor or not.

better to have left the market decide

yes, if we want to build cheap housing then they need to fund this by the state/local councils and not struggling first time buyers.

Kennyboy66

As developers are supposedly sitting on land with planning permission for 300,000 new homes, why not start to charge a proportion of council tax on the land after a certain time once planning permission has been granted ?

CLAPTON

Kennyboy66 wrote: »

As developers are supposedly sitting on land with planning permission for 300,000 new homes, why not start to charge a proportion of council tax on the land after a certain time once planning permission has been granted ?

I have previously posted about 'land value taxes' .. worth looking them up

basically the idea is that the 'council tax equivalent' would be based on the value of the land; so land with planning permission would be valued the same whether or not the houses were actually built. This would discourage land hoarding and encourage maximium useage of the land.

however, a builder will only build houses if they can make a profit and the imposition of 'affordable houses' quotas makes this difficult

Mr_Mumble

Graham_Devon wrote: »

The full article is well worth a read. She has her finger on the pulse

Really? She sounds, as usual, like she's locked in an ivory tower having to hear stuff about the pessants from Jon Snow! Because, Channel 4 news is the voice of the people and not Guardian/Independent readers!

It has been blatantly obvious for the past five-ten years that "ordinary working families" are priced out of private rentals*. It's very simple: you have five or six Poles working full-time hotbedding in a 2-3 bed terrace and they're going to outbid an "ordinary working family" that may have one full-timer and one part-timer for any similar property.

The major problem with Toynbee's piece is that she completely ignores demand and just looks at supply. If you supply more housing - say state subsidised with a nice big back garden - then the tenants or owners will quickly sub-let or add an outhouse so they can benefit from the latest tranche of overseas workers.

Toynbee can nash her teeth all she wants but presumably she is in favour of allowing citizens of A8 countries, and perhaps a lot more, from coming here. So, the only solution is to build more on brown and green field sites, the policy the Tories are following. Going the old socialist route will, of course, be a disaster. If we had the council housing occupation rates from the 1970s along with 3 million net migrants in a decade there would have been a lot more social strife in the past few years!

*Perhaps I'm being a little unfair on Toynbee here because I've got close relatives in Crewe but folks in Slough or Peterborough, most London boroughs, Aldershot or a plethora of other mid-sized towns should also know about the stresses in housing, yes?