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.

i think you'll find teachers don't start on 25k even when they live in london solo.

sleepyhead, first they came for the disabled , then they came for the unemployed, soon after they came for the elderly.(sound familiar?)
I do believe there has been a campaign by this government to divide and rule in order to take the focus off of the fact that they and the last government have been a qualified disaster and both chancellors have been useless at doing anything other than borrow to create what might look like a growing economy.
The reality is the economy was propped up by north sea oil debt and dodgy banking practices. On some forums people are being really nasty about the old and disabled and jobless

Swallowed, I expect you're right. The IT consultant earns that - more, in fact. He's 24. I didn't ask the teacher or the nurse or social worker.

Sorry to double post , but I think we need a government consisting of business people and a smattering of ordinary folk not millionaires, who are completely out of touch with the reality of life for ordinary people.

I honestly believe that if there is not change there will eventually be crime and social disorder never seen before .
Something has to give and something will IMO

I think most people don't have much wealth apart from what is tied up in their properties. I agree with the divide and rule posting.

Mortgages are cheaper than renting if you can get there to start with but at least with renting you can walk away. You could get repossessed and then chased for a debt for years and your house is sold at a very low price.

You always get the same old views whenever this topic is discussed! You always get the 'it wasn't easy in my day either's, and the 'they spend all their money on gadgets' crowd, the 'make sacrifices like I did's etc etc. It just gets funny after a while. Addressing some points here -

Buy somewhere cheaper!
Prices vary across the country, and that's for a reason. Up until the inevitable crunch in 2008 prices were flying up as people borrowed as much as the banks would lend them. They went up higher in places where higher loans were available, and that was governed by local salaries. You can buy somewhere cheaper yes, but in order to live there you will have to work somewhere that pays you less. That will not make them more affordable. If you buy further out of london for example the commute will take care of any saving you could make. If you are not yet retired prices are just as unaffordable all over the country.

Other people are buying whats the problem?
The number of properties changing hands has halved since the 'crunch'. Those that are buying for the first time, and this is what we are talking about here, usually do so with money given to them by family. That obviously disadvantages those without that option, and can cause family strife for those that take that option. People that buy without help are stretching themselves, and in most cases I would say they are being irresponsible with their and their families financial future. Interest rates are low, they can only go up from here. The base rate may well stay at historical lows for the foreseeable future but the cost of a mortgage is going up regardless. When people stretch to just about afford a low fixed rate they are storing up real problems for themselves when the rate on offer is higher later on. Who can claim to be responsible when taking such a gamble with their families home. In my view right now most people buying for the first time are those that cannot afford it.

It's always been hard, I did it, just work harder!
This view is usually based on ignorance of the current situation. Thats ok, you don't have to follow the market and keep up to date but if you're judging other people you would look less foolish were you to first at least gain some idea of the current situation. And to those who say it was hard before so what's changed? I would simply point out this.. if you struggled before this bubble, understand that it is now much harder. A greater struggle than yours. Also consider the point that it is actually possible for something to be unaffordable. If houses were a billion pounds each the advice to save up like you did is plainly not going to help. They aren't a billion pounds each, but there is a level at which they cannot be purchased. What would the market look like if that level had been reached? Look around you, what does the market look like today?

Times are tough, it's hard for everyone and people are just getting on with it!
It is not hard for everyone. If you have already bought your costs are a lot lower than someone renting. That is not because you are clever and deserve it, it is because of the luck of when you were able to buy. You can't help your birthdate and those born later have much reduced social mobility now.

The priced out have every right to be angry at the way this market has been allowed to get out of control. The banks lent too much from 2001 to 2008 and house buyers borrowed too much. It was never sustainable, prices cannot just gallop up and up relative to earnings and their not be consequences. A renting life is of a much reduced quality compared to that enjoyed by a mortgage holder. I for example know that I will never have children due to this crisis. I have to move whenever a landlord decides to sell my home. I have been evicted several times, and yet I have always been a good tenant and paid all of my bills on time.

The answer? Higher interest rates leading to lower prices and an incentive to work and save. Savers will be more active in the economy using their income from their savings and workers will see there is a point to working when they start to make progress towards owning a home instead of it being so out of reach to be a fantasy. Right now low rates simply move money from the workers and prudent savers into the pockets of the spendthrift and indebted. It is also why we have such high inflation. We need to encourage the right behaviour or it will just get worse.

Unfortunately we need brave politicians who are interested in what is good for the population as a whole rather than what will get them elected in the short term and keep the value of their properties high.

Im not holding my breath.

I don't think there is one answer to this issue.

There are lots of bits and pieces that would help.

Build more affordable housing

Make it easier to get mortgages

Make renting more attractive

Tax incentives for landlords who offer long term lets and / or renovate properties

etc

I also wonder about what will happen in the coming years. Many of my generation (40somethings) bought their own house, as did most of their parents. I know lots of couples who stand to inherit 2 houses (assuming the houses aren't used for care homes).

When the baby boomers die, we will have sinking populations, and presumably more housing stock. What happens to all those houses?

And what effect will this have on the housing market?

My children will be the same as me: they will get on the property ladder on the death of their parents.

Unless they get a job in the City, or some other lucrative profession. No one in our families has ever earned that kind of money, so I don't know how to encourage them into that type of career, we don't have any role models.

God knows how the situation could be improved. Maybe some kind of revolution in the funding of buying a house. Some kind of special savings scheme that starts at birth. If we saved about £2,500 per year for each child from the day they were born, they might have a deposit by the time they are 25.

Not that we could realistically do that!

I suspect a big part of many misunderstandings is the secrecy with which many people hold their earnings - Have never understood this idea. If we actually knew what those struggling were actually earning - and what their likely prospective earnings were - then the picture would reveal itself a little clearer.

See the quite different perspectives from LDR.." and "Higgle above ranging from minimum wage salary to new gradualte salaries.
Statistics give us mean figures but what really matters is how many people earn in certain ranges of salary (the huge (10s, 100s of millions earners massively influence the mean) - making the median figure much more representative but.......I really think this falls into the hands of the employers who benefit from our reluctance to discuss salaries and incomes.

If we are to better understand what is a reasonable multiplier for the value fo an "average house" (whatever that is) - then this bit of info is pretty vital.

Higgle describes a young civil servant in London earning £25k hoping for a posting to "somewhere cheaper" - we should bear in mind this will lose London Weighting (approx £3k.....IIRC) if he moves away.

In these days of open information - having some payscales "out there" to allow us to understand better why people are struggling so would allow us all to apply some real perspective on the discussion (and inform both young and old...)

I'm happy to start - is anyone else in......?

£30k Local Govt (low mgt/professional) salary after 27 years working in Civil Service and now LGt = £1850 take home pay supporting SAHM and two little uns - in the Highlands.

I agree, Mikey, about more openness, but don't think that three or four people declaring their salaries on here is going to give us a big enough sample to answer your questions.

But yes, I would love more transparency in teaching salaries, especially higher up on the scale. It would also be good if people who get paid huge amounts could explain why their 24 hours each day is worth so much more than anyone else's.

Is there a pay scale for civil servants in UK, that is published?

I know from Germany there is one -
You can look up and find out how much eg a teacher in certain State, with X years experience would earn.

I bought my first maisonette in late 1990's with interest rates rising to 14% and a salary around £8k. I could never afford a carpet, but the fuzzy brown underlay was ok. I lived with the advocado bathroom suite; had a black and white TV as I couldn't afford a colour licence and slept on a futon as I couldn't afford a bed frame and mattress.
Next came a 2 up 2 down terrace house. I went to a secondhand junk shop in intercity Birmingham, put on my best Brummy accent so I wouldn't be overcharged, and bought furniture.
I've gone on from there. I've been self employed for years, so have had to come up with at least 25% deposit long before everyone else.
My point is, I know it's hard, but you can't have all of life's luxuries up front, new furniture etc, etc and a house. People are too wired in to the essentials of having the best phone etc. rather than what will do for the time being. You need to have priorities.

Doh! Secondhand furniture - I knew there'd be a simple solution .

Workingmumsy, please read mondaytuesday's post. This is not about iPhones.

What Monday said: 'if you struggled before this bubble, understand that it is now much harder. A greater struggle than yours.'

It is even harder now. People aren't going on about luxuries. It's about having a decent house to bring your kids up in. Because that is better for all of us in the end.

workingmumsy,take the cost of that maisonette in the 90s and work out the multiple of the then average salary. Then look at what it would be priced at today as a multiple of today's average salary. I'll be amazed if you then can't see that second hand furniture would not address the problem.

williaminajetfighter, I couldn't agree more. There definitely needs to be restrictions on these unscrupulous people who have portfolios of properties and coin it in off of struggling tenants.
When there is a shortage of any resource why should anyone be allowed to hoard it?

Like many of the other posters here, I'll never be in a position to own my own home but I am fortunate (I reluctantly concede in this respect) to live in social housing where the rents are about half of what you'd pay privately and also fairly stable. I do feel a great sadness that I will never be able to choose where I live, or what type of accommodation I live in because of the competition for the more decent dwellings - for garden properties in particular - but there are families in bedsits at the end of the day.

A lot of land in London (and I dare say elsewhere in the country) is being snapped up and turned into huge blocks of luxury appartments - with only a tiny percentage allocated 'affordable'. Many of these flats then sit empty for the majority of the year because they are bought by people who only use it as a base when they are in the country. This type of thing really irks me, an empty property is a sin in my opinion.

i agree that it is time for interest rates to start going back up. yes short term it has kept the mortgage payers happy and living at much cheaper rates than renters but it also cripples any of us who don't own houses and would like to try and save for our own and our children's futures.

it also impacts on pensioners who did the right thing, saved, invested etc and expected part of their early retirement to be covered by interest before having to spend all of their capital. there is no interest.

i don't see how we can all afford to subsidise people's mortgages and debts.

i wish my social housing rent was half that of private rents. after 3 years of maximum rent increases and another one coming up we're virtually on a par with private rent levels now only with the additional costs of having to invest huge amounts to make them habitable.

The unoccupation issue is interesting. When we were looking to move to the suburbs a couple of years ago we viewed large 4-5 bed detached houses with huge gardens about 50% of them were lived in by 1-2 elderly people and often the houses were poorly maintained or they'd be living in only 2 of the rooms because it was probably expensive to heat the whole place. They'd also comment on how they were looking forward to not having to look after the garden. However the amounts they wanted for them was totally unrealistic and inevitably very few of the places we viewed actually sold also there is a lack of good properties for the elderly to downsize to. One of my relatives sold her large family home and downsized to a 2 bed house in staffed retirement village it has cost her the entire profit she made from her house sale to live there so no inheritance for her dc. However she and her dc have got the security of mind that if anything happened to her there will always be trained staff to look after her. As a rapidly ageing population we need to think ahead about our housing needs at every life stage. I fully intend to consider living a retirement village when the time is right and then my family home will be freed up for others.

Lets not forget that the 'historically low interest rates' aren't helping the first time buyers. They're helping those who overstretched in the last decade who can now frantically overpay whilst rates are low, which is preventing the correction we need.

Look at interest rates on products aimed at first time buyers with a 10/15% deposit. They're low but nothing like the 0.5% above base deals that many who had the fortune to buy earlier are on.

mondaytuesday - absolutely spot on post. The distortion of low interest rates to 'save the banks' and avoid a fall in property prices has robbed savers and the younger generation while rewarding those irresponsible bankers and those who over borrowed in the boom years.

mikey9 - somewhere in my computer I have house price and wage data since 1930. The average ratio since 1930 of wages to house prices in 3.25.

This 3.25 x ratio corresponds exactly to the old criteria banks and building societies used to have of only lending 3 x main earner salary plus requiring a minimum deposit of 10%. We need to get back to that sensible ratio BUT the problem is that would require house prices to fall dramatically to match wages. In fact, Govt and Bank of England are doing everything possible to prevent that happening and get mortgage lending at high multiples started up again.

the historically low interest rates didn't prevent me having to let my last property be repossessed in the end because what i needed was a buyer - not a cheap mortgage. if your circumstances change and you have to move during a housing market crash you are screwed. my property needed a first time buyer and the few of those that were still in the market for buying couldn't buy the property from private sellers because the private builders who'd been over building flats, flats and more flats could afford to throw money at them and say look we'll pay your deposit and give you cashback and other crazy deals because it was cheaper for them to sell than to hang onto locked capital even if they made a short term loss.

this is why i also don't really agree with all this 'build affordable housing' a) it is rarely any cheaper than comparable properties on the market from private sellers (my dad is a counsellor and the affordable housing proposals builders bring are always such a piss take it's untrue - the projected prices are higher than that of comparable houses in same area in the property pages) and they expect to be given precious land at giveaway prices in order to build them. b) there are houses people are trying to sell desperately that should be bought before new ones are built.

we seemed to encourage property developers in our towns to such a degree that they saturated the market with flats, apartments, factory conversions etc that were at crazy high prices for the first wave of buyers who were then stuck with them because they were overpriced and unsustainable and then when the crash came they could afford to sell them off at stupidly low prices with deals like we'll pay your stamp duty, surveyors bills etc therefore undercutting the rest of the market who were desperate to sell and going down to really reasonable prices but could not compete with companies giving such deals.

i obviously can't speak for national trends but here i really think the overdevelopment of flats by private companies contributed to totally fucking up the housing market contributing to an initial rocket of prices then the complete devaluing of property.

sorry bit of a ramble

and the thing with these private builders and developers is that the money they make selling doesn't go back into the market. if a private seller sells their first time property they then buy the next step up the ladder and that property owner buys again - up or downsizing. the market flows.

when you buy from a private building company it just stops. they make a bit more profit and block the natural movement of the market whereby that purchase could have a knock on effect of several more sales and purchases.

really, really think we need to be buying from and selling to each other not just pouring money into millionaires pockets.

I knew it would all go badly wrong when in the mid 200s there were property programmes all over TV and people were making more money every day by just owning and living in their house as it went up in price than actually going out to work. It was like the entire country came to believe we could make a living just buying and selling houses to each other at ever higher prices and banks were ever eager to lend the money to sustain that fantasy.

That was always unsustainable because logically house prices cannot go up faster than wages for very long before they become unaffordable.

It was the very definition of a bubble.