Affordable Housing - Can it be done?

pamaris

It has become such a political issue that the what happens over the next few years might favour the population of most desirable voters.

Who would be more upset at the Labour party if house prices "crashed", corrected, or plummeted? Is the population of first time buyers who are currently priced out higher than those first time buyers who bought in the past 3 or 4 years and would be forced into negative equity in the aftermath of a downturn?

The people who would be directly upset about a bubble burst are those who got on the ladder in the very recent past and have no choice but to move due to external circumstances. Surely this is a small minority of homeowners.

Do homeowners who bought before the boom not realise that HPI only benefits them if they sell up and rent at the height of the boom? If their mortgage is £70k, what do they care if their house is "worth" £120k or £250k? Why would homeowners who have no intention of moving be upset about a drop in house prices across the board? It just means their next house is cheaper.

Maybe I am missing something.

ETA: I forgot about the regular Joe BTL pension posse... as interest rates continue to rise and they can't afford the expenses of being a landlord, they will be forced to sell, with negative equity being a consequence. So add these people to the other minority of FTB's who have bought in the past few years and must sell... are there more of these two groups added together, or more priced out aspiring FTB's? The largest group of irritated voters will have policy tailored to them.

Gorgeous_George

A_Fool_&_His_Borrowed_Mon wrote: »

This question is dead simple like 1+1 = 2

How do we get affordable houses = Drop prices

Then they become affordable!
:money:


Funny how the simple & obvious answer elludes everyone, of course, it's the elephant in the room. So the answer is anything but drop prices.

Mmmm, can we do the same with Mercedes cars?

Dropping prices would not necessarily make homes more affordable. For example, lower prices coupled with lower wages or higher ineterest rates would nor impact affordability. The equation is more complex than 1 + 1 = 2.

Supply and demand. Prices are driven by demand. there is too much demand for too few houses. Reduce demand by killing off a significant proportion of the popuation (bird flu/war?) or by encouraging people to share homes (marriage tax breaks/lodger schemes/zero Stamp Duty when downsizing?) or by limiting immigration/encouraging emigration. Increase supply by making best use of current housing stock, redeploying large businesses more evenly or building more houses.

Whatever else, interest rates are not the answer. They will produce cheaper houses but they are not likely to be significantly more affordable.

Increase wages. Whatever happens to wages will not increase affordability for the masses. If we all were awarded a 50% rise tomorrow, house prices would rise accordingly and there would still be those who could not afford to live where they wish.

Build more houses is the obvious answer. Make them council owned and protected from right to buy. But don't mix the estates with private homes as this rarely pleases either tenants or owners. Affordable rents rather than affordable homes is the way ahead.



GG

DontBelieveTheHype_4

But people in general want to own their own home so increasing council rented accommodation would be unpopular?

The way ahead is to build more houses (enter GB), increase interest rates to curb demand and turn sentiment against HPI (enter the BofE), and control lending (enter the FSA).

dannyboycey

DontBelieveTheHype wrote: »

But people in general want to own their own home so increasing council rented accommodation would be unpopular?

The way ahead is to build more houses (enter GB), increase interest rates to curb demand and turn sentiment against HPI (enter the BofE), and control lending (enter the FSA).

Good post. I'd also like to add that creating more shared ownership housing as proposed will just serve to delay the pain that will come if things aren't sorted.

There are a few possible outcomes as it stands - A property crash/major correction or the building of new homes on a never before seen scale. I don't think the government is capable of the latter and as for wages rising to catch up with HPI whilst the market undergoes a period of stagnation, I just don't see it happening.

A soft landing could only be created by putting all of DontBelieveTheHype's suggestions into action. Will it actually happen? I'm not convinced.

morg_monster

The people who would be directly upset about a bubble burst are those who got on the ladder in the very recent past and have no choice but to move due to external circumstances. Surely this is a small minority of homeowners.

I don't know about a small minority - I'm 26 and many friends have bought 1 & 2 bed flats in the last 18 months. If prices do crash/correct it will be at just the time when they are all wanting to start a family and move to a bigger place and then they will be stuck ... I'm sure that anyone in their mid-late 20s who have bought a 2 or fewer bedroom house in the last 1-2 years will be in this position if prices crash/correct in the next few years.

Although maybe you don't count having a baby as having "no choice but to move" - but who really has absolutely NO CHOICE in the matter of moving house? Not having the room to have kids must really grind if you have enough income to keep, feed and clothe them and possibly send them off to music lessons too...

This is why bf and I are holding on to our cash and renting til we can afford to move straight in to something bigger, even if it takes a while, and if there's a crash in the meantime, all the better for us ;-) but for our friends with their little flats, I can see problems ahead for them

pamaris

morg_monster wrote: »

The people who would be directly upset about a bubble burst are those who got on the ladder in the very recent past and have no choice but to move due to external circumstances. Surely this is a small minority of homeowners.

I don't know about a small minority - I'm 26 and many friends have bought 1 & 2 bed flats in the last 18 months. If prices do crash/correct it will be at just the time when they are all wanting to start a family and move to a bigger place and then they will be stuck ... I'm sure that anyone in their mid-late 20s who have bought a 2 or fewer bedroom house in the last 1-2 years will be in this position if prices crash/correct in the next few years.

Although maybe you don't count having a baby as having "no choice but to move" - but who really has absolutely NO CHOICE in the matter of moving house? Not having the room to have kids must really grind if you have enough income to keep, feed and clothe them and possibly send them off to music lessons too...

This is why bf and I are holding on to our cash and renting til we can afford to move straight in to something bigger, even if it takes a while, and if there's a crash in the meantime, all the better for us ;-) but for our friends with their little flats, I can see problems ahead for them

The people who have "no choice" but to move are those who must relocate due to job or family obligations.

Yes I agree that plenty of 20somethings have bought flats in the past few years with the expectation that they will just be able to hop up on the next rung when they have kids. I see problems ahead for them too.

However, in the grand scheme, who has more muscle, those who would face negative equity, (real not nominal), or those 20 and 30somethings like us who missed the boat? I am 30 and my DH is 38. We have 2 kids, 5 and 3, and DH makes above the average/ median wage. We missed the boat because when we "should have" been buying a house (2002) we relocated to the USA (my home country). We returned to this mayhem in the UK in December 2006. For the time being we are living with DH's mum rent free in a tiny 3 BR semi.

We are grateful to have the opportunity to save money but this is seriously not an ideal situation. What I am getting at is, I wonder how many others are waiting in the wings in the exact same situation as us. How many priced out FTB's are there and how much muscle do we have?

Romani_Ite_Domum

It appears that the people who will unjustly suffer in a crash will be those who bought a home recenty and are in NE.

GB could consider appealling to the banks to make NE portable. This would enable people to move freely.

dannyboycey

Romani_Ite_Domum wrote: »

It appears that the people who will unjustly suffer in a crash will be those who bought a home recenty

I guess it's debatable as to whether they will suffer unjustly, as there are clear indicators that the market has peaked. It's not inside information and they didn't HAVE to buy, despite many having a mindset that they do.

morg_monster

dannyboycey - I couldn't agree more. The friends who have bought 1-2 bed flats are our friends with great salaries. The poorer ones (relatively) like us look on a bit jealously but it will be interesting if a crash does occur and us poorer ones can buy bigger places roles will be reversed...

on the other hand, who am I kidding, we all live in London so probably won't feel a crash as much, and the ones who have bought are on ridiculously giant salaries (for their mid-20s) and probably won't even notice as their current flats become part of their pension and they move out to the Home Counties... :-)

Romani_Ite_Domum

dannyboycey wrote: »

I guess it's debatable as to whether they will suffer unjustly, as there are clear indicators that the market has peaked. It's not inside information and they didn't HAVE to buy, despite many having a mindset that they do.

There are clear indications that the market has peaked but there is also much VI media spin that HPI will continue for many years.

There are many people who have bought houses as family homes over the last couple of years. They may have not liked HPI but wanted to be a OO and have had to buy at an over price. I would have sympathy for these people if they were unable to move due to NE.

If the NE was portable then a crash would be a good thing for the majority of people.