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.

yes 200 pcm seems very low. I agree about the lack of a living room which is a shame in shared accommodation.

Swallowed - it's probably fair to say this is more of my DHs project, it goes through on his tax return as I'm the higher earner, though project is too strong of a word - it's just a simple investment. I trust him to sort out the finer figures but the numbers are a true reflection of the situation if not exact.

You didn't however read my post properly - we have approx 110k left on the mortgage and I said it was c£200 a month and could in fact be a be closer to £250.

You were wrong in assuming we don't think a living area is needed in a house. Our properties have 2 x reception rooms plus a kitchen big enough for a table. Plenty of living space for most people.

I see I crossed posted with alemci - another one assuming we rented out the only reception room! We are good landlords, we wouldn't be able to rent our house out through the uni accommodation office if we weren't.

so the house originally had 3 reception rooms and 3 bedrooms. one reception room has been turned into a bedroom. what an unusual house. and you still think it sounds vaguely possibly to be paying around 200-250 a month on a 110,000 loan.

i'm afraid it does turn out you don't have a clue what you're talking about, sorry. you have talked about figures so confidently yet when it's come to details you clearly not only don't have a clue but don't have a basic grasp of how much interest is paid on a mortgage.

uni acomm rents through anyone who is willing to do long lets and rent to students. don't be naive.

This is ridiculous! Try plugging the numbers into the calculator here, that is 110k @ 2% interest over a 35 year term and remember we're on an interest only mortage. Happy now?

I'm also see if I can find a link to the house we bought if you don't believe that 3 bed 2 reception room houses exist - have you never been to a Victorian terrace?

Gosh I'm so surprised to see how people can think they know more about my affairs than me! The uni we let through has stringent checks and inspections!

Link to a similar property with 3 bedrooms and 2 reception rooms plus kitchen

Link to a similar student let

Is anyone going to come back? It wasn't particularly nice to be told I didn't have a clue about my own finances and for people to cast aspersions over what I was saying...

35 years????

i had the impression that you said there were three reception rooms and you said that there were still 2 after turning one into a bedroom. yes i know what a three bed terrace is like. i also know the size of those '2' reception rooms made from a dividing wall stuck down the middle of a lounge diner and know friends who stayed in 'bedrooms' made out of one of them with a paper thin wall between them and the tiny lounge.

Our houses have very separate dining and living rooms that have been there since they were built! We didn't put any walls up. Yet more assumptions! There is a decent sized living room and kitchen with room for a table and 6 chairs.

And yes, a 35 year term. I'm not sure you quite understand the concept of an interest only mortgage i.e. they are not designed to pay down the amount and therefore the repayment period is arbitary. We do, however, pay off a chunk of the mortgage inbetween products using some of the profit we've made. But that is by the by.

Thank you for the links and information, interesting. I would expect the rate to be higher to be honest, less than 3% even these days is low, my 5% example is from offerings I have seen for interest only.

It won't be let all year round being a student let I imagine, what proportion of the year is it let? Are all the rooms always taken?

140k sounds cheap to me for a 3 bed 2 reception room house, I would expect it to be small and not in a particularly nice neighbourhood. I would also expect your maintenance and management costs to be fairly high compared to other buy to lets due to students.

So bearing all those things in mind I would not expect a clear 800 a month profit all year, I would expect the average to be less. However I can see that you could be making money here for as long as rates stay low.

However I can also see those gains being lost as the value of the property devalues, it wouldn't take more than a 5% drop in a year for example to relieve you of an unlikely 8k a year profit.

So from a purely financial perspective it's a tad on the iffy side in my view, but actually potentially beneficial. However bearing in mind where things look to be headed and when you bought, and how,you're relying on such low rates to get anything, there are better options out there.

However what would stop me in my tracks is the thought of stuffing 4 students into a small house in a rough neighbourhood and releiving them off what to them would be a substantial amount of money. We all roughed it as students, but I feel this is on the exploitative side, and so not to my taste personally. In my student days I'd visit friends in house shares like this and they felt ripped off, landlords were always despised, accommodation was always poor with cheap and nasty fixtures and furnishings etc etc.

Good luck to you, and again thank you for sharing so much. But not for me, and I'm afraid I don't have much respect for those that do get involved in this part of the market.

I expect you to see some positive cash flow in the short term, not to the extent you have made out, but positive none the less. The medium and longer term however do not look good in my view.

so if interest rates double you'll be paying double and you will never own any of that house but just pay interest for 35 years?

if interest levels go back to average 5.5 per cent taking your £200 to £550 pm. let's be generous and say you pay £100pm in maintenance/fees/whatever. that would be £650 profit a month minus tax at 40 per cent i believe you said leaving £390pm so long as you don't have any major repairs or anything.

a buoyant interest market of say 8 per cent would give you an £800 mortgage, tax and an end profit of £240pcm minus any major repairs, re decorating, re carpeting etc.

are you willing to see yet that a large amount of your profit is in fact purely from the crazily low interest rates that are being artificially maintained at the expense of people's pension funds, savings, investments etc?

in one recession interest rates hit 12 per cent - on your property that would have been interest of £1200 a month leaving you (after tax) with £60 to cover all maintenance, insurance (i presume you have to have that) etc. but you were protected from that.

nor have we factored in stamp duty, estate agents, surveyors. furnishings and fittings etc start up costs or those costs at the to be paid again at the end when you sell.

That is the gamble you take. I personally believe that house prices will have risen in the 35 year plus period we're looking at even if they fall in the short/medium term but there are no guarantees.

Even if the worst happens and house prices don't go up (unlikely) I am happy at the level of income we see. And should interest rates go up to a level where we are just breaking even we are still in a neutral position. It is unlikely for rates to stay as high as 12% for many many years.

I, for one, wouldn't mind if house prices fell in the next few years! We will be looking to buy our 'forever' home in this period so would suit us just fine

Yes it's a dangerous time to invest for a long term when rates are so low. You get that benefit early on and make some assumptions based on cash flow that you simply will not see again in the lifetime of the investment.

And what a time to be exposed to this market with borrowed money! Unprecedented economic sea changes are occurring every few months!

My advice for anyone in a similar boat for what it's worth, pay down the debt as soon as you can.

I see no reason for higher property prices in real terms in 35 years.

I advice caution, in my view any positive cash flow you are seeing is temporary. You are exaggerating in some respects, it's not fully let all year, there are costs due to students, etc etc, you have not taken account of the costs as identified by others in the thread, etc. it's fine to do that on this forum but don't fool yourself. I hope you're not genuinely as smug as you sound on here, this is on a knife edge as it is and this current fortunate position of positive cash flow is temporary. Don't let it fool you.

Good luck.

MondayTuesday you have made yet more assumptions about the quality of our let! It is in a nice student orientated area of a city and about a 5/10 minute walk to the university campus. It is let for 12 months of the year as many students choose to stay on to work in holiday periods. All our properties are let for the next academic year in part, I think, due to our level of upkeep and the popular road it is on.

I do appreciate that we are in a golden time in terms of the profit we see but this is really a red herring. We didn't buy to top up our income, rather as a long term investment (I know we disagree about the long term outlook for property!) so as long as we stay cost neutral I'm happy. Though the extra cash is a happy perk for the time being .

I tried!

How am I smug? Absolutely ridiculous. And how do you know if it is let year round?

I am absolutely not fooling myself. As I say as long as we remain cost neutral we're happy and we are in no way reliant on this income.

You tried what? To explain how our investments have been a disaster? Your assertions are not based in any way in fact just projections. To be fair as are mine but stop trying to tell me that I am in someway naive and lacking financial nous.

You wouldn't be in this position if you had financial nous, I've been trying to help you. That you don't see any issue is evidence you don't get it.

If you ignore the future the past hasn't been great either, you bought right at the peak of a bubble, there's no good way to spin that.

I think we're done here, you're welcome.

This comes down to you believing house prices won't go up in the next 35 plus years and me believing they will. In the area we have bought values have remained static in the years since 2007 largely due to it's proximity to a large university. This provides me some comfort.

But we have no real way of settling this unless we put a diary date in to check back in forty years time

What I haven't appreciated is your assumptions about the sort of landlords we are and the state of the property we let. Not really on.

This comes down to you believing house prices won't go up in the next 35 plus years and me believing they will.

And that rates wont go up, interest only mortgages will still be available, demand will not drop due to all manner of things such as university relocation/change or change to the nature of the neighbourhood, students will continue to be prepared and able to pay enough to keep your plates spinning, etc etc etc. over the next 30 odd years.

The background is student numbers dropping, the more dangerous financial products being taken off the market, inflation rocketing impacting what people can spend on their accommodation, house building programmes on the agenda, property prices falling and with unprecedented financial chicanery in response to the impact of an asset bubble most keenly felt in this very asset class.

Not just that prices won't rise. Which by the way, they won't. Has there been any other time in history when it was a worse time to do this?

Anyhow that really is me done, what's the point, you'll have to learn the hard way I guess.

personally I would love to know where you can get 2% on a BTL, really

I just did the sums and it came up as 50K so a 3 bed terrace in a nice uni town for 57.5K at the peak of the property market for a 2% mortgage which has not fallen in value (although TBH there is very little value there for it to fall)

whats amazing is that people think this is down to cleverness and hard work and not fiscal intervention (OBface not saying this is what you are saying)

However I will comeback and say at least twice you have siad 'what about me/my friends' when people make statements you dont like and at no point have I wished you or anyone else homeless

TBF you have saveral times pointed out how prices could fall significantly and interest rates rise and you would be absolutely fine

so I do think you should apologise and retract that accusation

the number of people who would be homeless if prices fall would I think be pretty small.

The aim should be to stop fiscal planning propping up BTL

divisive, wrong and negative effects on the whole of society.

I still say tax BTL at 50% a nice little earner, as you've said so many times you would be fine, so would everyone else who lives in their own home

prices will fall

problem solved