Guest blog: Shelter's Chief Exec on the rise of unaffordable housing

[JessMumsnet]

This week, to highlight the fact that housing is increasingly unaffordable for many, Shelter published research which showed what our weekly shop would cost if food prices had risen to the degree that housing costs have done over the last decade.

In this guest blog, Shelter's Chief Exec Campbell Robb warns that unless something changes, the next generation will find it even tougher to get a stable and affordable home.

What do you think? Are you struggling to get on the property ladder, with rising rents making it increasingly difficult to save for a deposit - or are you worried for your children's prospects? How do you think the situation could be improved? Post your URLs here if you blog on the subject, or tell us what you think here on the thread.

HI roneik, I agree with what you say. The death of manufacturing in many ways has turned us into a 'financial services' banana republic. So much of our economy now seems false: It's deeply disconcerting that certain areas of the country are completely driven by the public sector economy and that much of the private sector generates their money from this sector. It just doesn't seem tenable. I remember seeing a stat when I lived in Scotland that over 10 years, 70-80% of the new jobs and growth came from the public sector. scary!!! The government just circulating money is not a great way to run an economy.

So I completely agree with you and the bad decisions made by previous governments. However I also think that economy is slowly evening out, somewhat at our expense. Our lifestyle is propped up and slightly false in that we buy most of our goods from people who are paid very little overseas, yet still expect to be well paid ourselves. It doesn't make sense. But that's another rant about globalization!

I've gone off-piste, but hey... what is a MN thread for if not going off thread!

Not blind faith at all. History. You can chart the past. You can look at the 1929 crash and the rest. You can see the ups and downs. You can certainly look further back and look at how Britain's prosperity grew particularly on the back of the sugar industry and then the industrial revolution and you can remember our dark ages and how the various other empires from Genghis Khan to the Romans have come into the ascendancy. However it remains the case that most people here will do best if they buy a home when they can and keep it for 50 years for all kinds of reasons.

It is not right to suggest times are the hardest they have been. You need to take a longer view. My grandfather in his boarding house with 26 other young men in 1901, the sheer poverty of many here in the country and towns in the 1700s and 1800s. In those terms even the poor of the UK have a much easier life and much better than many on the planet.

The bottom line is most people who might otherwise buy a buy to let if they don't do that may well just spend the money on shopping and holidays so as financial discipline paying back debt and investing tends to be wise if you are in it for the longer terms and many tenants are very grateful indeed that landlords are prepared to make property available for rent.

i don't think it is off piste william. i do think though that for the levelling off to happen our living costs have to drop - namely the cost of keeping a roofs, however basic, over our heads.

earning less (or ceasing to earn more) is fine if the cost of the very basics aren't going up way and beyond what can be afforded by lower earners.

Xenia,We have gone forward in our living standards the previous 300 years , we are going backwards now.

Gosh Mondaytuesday! You've really got the daggers out! I'm not sure our property purchases have been so disastrous given the level of income we see from them per month, even if there was a property crash this would more than compensate for the loss of value. And given that, being in close proximity to a university, their value hasn't really dropped since 2007, I'm relatively confident. Looks like other potential landlords are tempted by the returns we see and this keeps prices buoyant.

Why oh why is the bill for benefits going up when unemployment is going down?

Answer it's false data

Why oh why is GDP not going up with all these extra employed people announced by the government ?

Answer it's manipulation of data and sanctions and bogus self employed

The agencies get a payment for everyone they get to create a fictional business.

The point of this post is be careful of what you believe that comes from vested interests and compliant media.

Lastly be careful what you wish for especially budding buy to let empire builders

Good post Roneik.

Thanks Solo, I wonder how many buy to lets that were recently acquired will survive the Universal credit rent to be paid to claimant rule .

IMO the rent arrears will finish off quite a few.

There have been several pilot schemes and rent arrears went up considerably.That will reflect on housing associations badly with their lenders.

Could even be the catalyst for a crash in property prices.

I listened to an economist today on the radio and he was saying that there never has been a time when low interest climate encouraged investment in industry. Perhaps that answers the question why corporations are sitting on best part of a trillion pounds and not much investment.

Still we are bailing out banks and buy to lets with low interest rates and perhaps as we rush to serfdom we should be grateful.

Triple A.

Good luck buy to letters, property only goes up and low rates never revert to norms do they, and just think of how affordable rents are when we import so much inflation when the pound tanks.

What? Eh? But... Kirsty said on tv! I'm rich, debt is wealth right? Right?

Don't panic mr mannering!

Too late.

Bye!

If the budget doesn?t adjust tax for earners at the lower end considerably then things will deteriorate rapidly this year. It?s the only hope for people in this category. They spend virtually all of their money on living expenses so this would create a bit of growth in the economy.

There has to be a point at which people just cant feed and house themselves. With the inflation coming down the line this year it will be hell for millions.

Tax IMO should have a starting point of £12.500
Or higher

This takes low paid out of tax
QE projected 275 billion this year as well as the drop in value of the pound will bring stagflation.

Should have said ?we will see acceleration of stagflation ? Scary days ahead methinks

since this is still going I'll come back to it.

SOrry OBface every time some one mentions that the gov should stop propping up house prices, interest rates eventually will revert to the norm and no doubt overswing since they have been held artificially so low for so long you come back and say but 'what about me and my friends'

Fiscal planning should benefit the whole of society, you've been a winner for so long eventually it will swing round (Xenia is right about taking the long view remember Gordon no more boom and bust) well.........

Last weekend we travelled back to Edinburgh. I had an afternoon off and window shoppined in every letting agent and estate agent from the top of Leith Walk to the foot of the Walk. I was staggered by how much rents have increased there. And the LHA cap for a two-bed is £115-odds/week.

Wow!

Not sure I do Southwest. We're in good enough financial health having not overstretched ourselves to weather any property storm. My argument has always been why is it ok to wish one tranche of people out of housing to benefit another tranche who would then be able to afford it? So really just a moral question. The only crime people purchasing (residential) property at the top of market have committed is simply being of the wrong generation. I'm not arguing that interest rates shouldn't go up (not a bad thing for us - we'd have a better return on our savings) etc just that it's a bit mean to wish for something that would have an adverse affect on so many people. And also around how we're not the devil incarnate by simply being landlords.

Leveraged debt with interest only mortgage barely covered by income secured against illiquid depreciating asset, credit downgrade first time in 30 years, purchased at the top of a massive bubble with historic low rates, face, bovered? Sure youll be fine, no problem.

As a buy to letter you are the minority having an adverse affect on the majority. It's been explained many times to you now.

As for those who bought at the peak for use as a home, they are responsible for doing so, no one else. They didn't have to borrow an unsafe amount pricing out the responsible, they should have accounted for the likelihood of a change in interest rates. They took on the debt, they are adults, it is up to them to be responsible and they should be held accountable for their own actions.

Because if they are not made to, everybody else suffers too. The real economy, in which everyone is a participant, cannot be sacrificed for the sake of a minority of spendthrifts.

Morality indeed. Moral hazard. Look it up.

MondayTuesday I'm not entering into the same old arguments but please be assured that in the case of a massive interest rate hike/loss of value we'll be ok. It does irk me that you are convinced otherwise having no knowledge of our finances. Who knows, if prices do drop drastically we could even buy a few more houses

And when you say mortgage barely covered by income what are you basing this on? We pay just over £200 a month on one mortgage, for example, and get £1300 income (house rented out through university accommodation agency). Admittedly, there are upkeep costs and we do pay tax on any profit but still, I think we'll be ok. And that's even before taking into account our salaries which have more than doubled since we bought the properties. I know you'll come back and say we're still likely to lose money but you never make any money without taking some risks.

We have also saved any profit we've made and paid down our mortgages when switching between products.

I think you'd love to believe that this will ruin us financially but this is simply not the case. Sorry!

Ok so break it down for us all. What did you borrow, at what rate, what were the deposits, how much has been repaid, when did you buy, etc.

You've already said you bought at the peak. You've also said you have savings and also an interest only buy to let, or was it two? Why have you got cash when you are in debt paying interest?

I have a portfolio of shares, I could easily identify the one that has made me the most on its own and claim I'm making money just by giving the details of that one, it doesn't mean my portfolio as a whole is doing as well.

Give us the whole picture if you're so pleased about it.

All the buy to let people I know of will recognise the picture I am painting more than yours. Your past statements show you don't understand the most basic of concepts, yet your bucking the market apparently, and even when you lose you win too, that's new!

It sounds like you're talking nonsense, or if you truly believe everything is going swimmingly you need to spell out your finances to someone at least so you can get some insight into the reality of your situation.

And again your salary has little to do with it, throwing money down the drain is still throwing money down the drain.

I don't feel comfortable giving a detailed breakdown of my investments here, I will however give an overview.

We bought 2 properties in 2006/7 with a 15% deposit on both.

They are rented out (through a university accommodation office) for approx a month £1300 each.

The mortgage payments are approx £200 a month.

The prices where we have bought (very near a large university) have remained buoyant and a quick look on rightmove would suggest that we could sell for pretty much what we bought for.

We have bought the properties with a long term view and wouldn't look to sell for at least 30 or so years (i'm in my early 30s).

I am very happy with the level of risk we have taken. You have no idea about any of our other investments or indeed about the rest of our lives.

I don't think I'm bucking the market - the figures are the figures. Not sure what you mean by 'I think I'm winning when I'm losing'?

Yes house prices may fall but I believe that we're in it for a long enough period for this not to be an issue.

Yes interest rates may rise but I think there is enough margin in our profits to cover this.

Yes we do have savings and money invested elsewhere, to us it makes little sense to pay off all of a BTL mortgage (though we have paid off some) as it ony adds to our tax bill at the end of the year and, who knows, if prices do hit a rock bottom, we could always buy more property Seriously though, we do like to have a certain amount in the bank to give us flexibility. And future school fees, etc.

I'm not worried about our situation. Happy now or am I still missing something?

Winning when losing was regarding your comment that if prices fall you'll just buy more property... overall thats a loser Im afraid.

So interest only at 85% loan to value and paying 200 a month? At what rate? If I assume 5% you are apparently renting out property purchased for 58k for 1300 a month.

The last property I rented at around 1300 a month had an expected market value of 350k, some way off your 60k.

am I still missing something

I think so. What rate did you borrow at? How much was the purchase price?

It sounds quite odd to me so far to be honest.

yeah - would have to be extremely cheap property to be paying £200pm in interest yet in an expensive area to be reaping in £1300 a month in rent. doesn't add up

Re still being a loser overall if we buy more property should prices drop - you seem to forget that we are in this for the long term. Even if prices fall in the next few years I fully expect them to rise over a 35 year plus period. You may disagree but in the absence of a crystal ball we don't know for sure one way or another.

I said we're paying c£200 a month, it may be £250 but i'm not at home at the moment so can't check. I do know that we're not paying 5% interest, remember we're on interest only. We bought the houses for around 135k and have approx 110k left to pay (paying down between products). Sorry if I do not have exact numbers - all I know is we make a very healthy profit!

You are forgetting that we let student property where you cost a house per room, we charge each room at £82 a week which to be honest isn't much more than I paid 10 years ago as a student myself. It is a 3 bedroom house plus a reception room that is rented as a bedroom. This is the going rate and we let through the accommodation office of the University.

so you don't know how much mortgage is, how much interest you're paying etc? sounds like this is more your partners project if you don't even have grasp of these very basic facts.

i'm at a loss how anyone could be paying £200pm interest on a 135k house.

also joy to here you're one of those landlords that packs in as many as possible and doesn't think a living area is needed in a house.

Today I read that 135.000 properties sold since 2007 lost on average £24.000
add to that just a mere sprinkling of inflation and you have made how much ?

I also read that Nationwide are to stop lending to buy to let that have housing benefit tenants.

The rest to follow?

This may well be the mother of all catalyst for house price crash

It's not all doom and gloom , after a stiff drink I might say "it's a half full glass"

I cant promise I would say that the next morning though

www.planetpropertyblog.co.uk/2013/02/27/nationwide-ends-lending-to-landlords-with-tenants-on-housing-benefits/