Why have people tolerated the housing catastrophe of the last 30 years

[nomemono]

I know it has been good for those geared up or alt the top of the ladder in the mid 90s, and to a declining degree, most years since then, but really, how has this been allowed to happen. Just as one illustration, houses in the frankly crime ridden North London estate I grew up now cost 4 times their real, inflation adjusted, 1997 price. £420,000 to live in one of the worst areas of London, in an old, poorly insulated house. Oxford, affordable when I was a student, now almost worse than London. Cambridge, Brighton, anywhere well linked and with good transport links or local jobs, the same. People casually posting on this website about having £900k to spend on a house. Single people shafted, ditto those without inheritances. How has it come to this?

Indeed it is a democracy and eventually the young will start voting for parties who will benefit them! That would be the time for the oldies and well off to start worrying!

They’ll have to find one first.

Same difficulty finding anywhere to live for some of my son’s workplace peers. Every year when a new group of graduates start, there’s an appeal for spare rooms and sofas in his firm and some new starters end up living in hostels or even tents for the first few months. It’s ridiculous now. Massive shortages of somewhere to live in some places, worse in uni towns or tourist areas - my sons town is both meaning huge numbers of homes have been lost to holiday lets and uni student houses.

Young don’t vote much though. And im
not sure they’d vote for kicking their grandparents out of a small housing association semi.

• Ban BTL mortgages - how many MPs are landlords? Perhaps being a landlord should not be an option for them and their immediate families (remember Cherie Blair's BTL empire?). Access to funding is part of the problem, but we do need to provide long term rentals somehow.
• Ban Airbnb - I don't think the govt is keen on banning entire businesses, but this is a major issue in holiday spots worldwide. They tout licensing but does it work?
• Build council houses - OK but where is the funding coming from and who will be prioritised for access? This also takes a long time.
• Tax empty homes - if you can find out the ultimate owner, sure. Plenty of shell companies with empty homes in prime London.
• Punitive measures on second homes - how many MPs have second homes? The higher stamp duty should help with this.
• Restrict lending to 3x income - that would crash the house market and damage the economy.

Tax empty homes - if you can find out the ultimate owner, sure. Plenty of shell companies with empty homes in prime London.

Presumably they pay council tax ? So send the bills to the same place. And if they don't pay, repo them and auction. A few sold off like this and people would soon get the message.

Could work?
www.propertymark.co.uk/resource/ministry-signals-tough-stance-on-empty-homes-with-compulsory-purchase-order.html

So how are people buying houses for silly money?

So how are people buying houses for silly money?

@mumda I'm not sure what relevance that has to my point about lending tightening up?

There are a number of ways some people can still buy. The market isn't only comprised of FTBs.

@mumda because at the same time as being more restrictive about who* *they lend to, banks are lending larger sums of money to a select few on extremely high incomes or with larger deposits.

Imagine in the past a bank made, for example, 100 loans of 100,000 - that's £10m sloshing around in the housing market.

Today because lending criteria is tighter but the very richest people have more wealth (so bigger deposits) and higher incomes, and are borrowing big multiples of those incomes, they might only have 50 outstanding loans, but each for 500,000 - that's £25m of money bidding up house prices.

Obviously those are made up numbers but the way mortgage lending has changed - you might hear it referred to as "credit rationing" - explains that apparent paradox.

Re: Airbnb. A very close family member of mine died when I still had outstanding hosting reservations, which I then cancelled. I was charged punitive fees unless I emailed them the death certificate, while coming yo terms with bereavement. They are also said to facilitate lets of illegal settlements in Occupied Territories in Palestine. They are a vile organisation whom I now refuse to use.

We didn't 'allow' it to happen, we actively engineered its happening. Those nicely housed vigorously and determinedly opposed every planning application put it. They voted for people who promised to block development. And it's all worked out very well for them, they are now sitting in houses worth an absolute fortune.

And the opposite end of the spectrum to people borrowing silly amounts on low salaries was that it locked a great deal of self employed people out the housing market many of whom used to self declare - but in fact had good incomes - given how you pay yourself in self employments it’s often hard to prove the £5k a month every month but you might earn £80k a year - but banks didn’t like seeing it as’dividends’ - so stupidly thought it was safer lending to Jo and Jim on £50k a year combined rather than Ross and Rosie who had earnt £90k consistently every year in self employments for 8 years - they demanded much higher deposits etc - forcing quite a lot of mid to high earning self employed into private rentals rather than buying - and hence inflating mid market rentals too due to demand - and if you don’t think that’s the case, looking round ourselves and many of our freelancer friends in their 40sand50s - I assure you it is

because there will always be those who do have wealth and don’t need to worry about scrimping and saving 35k for a deposit. who’s parents can gift them it or they can live at home for free for years and save it that way

and of course the buy to let mortgages.

Not sure of your point - permanent employment is much more secure, and I'm sure 'Jo and Jim' as you put it, were asking to borrow far less than you were.

So I think what you're saying is, the self employed have effectively reduced house purchase prices?

@Drew79 but the permanently employed really aren’t more secure- if a business/self employment is going down the pisser you kind of tend to know about it for quite awhile, often months , whereas people in employment I’ve known have been made redundant with literally a weeks notice - the idea it’s more secure is poppycock unless you work for something like the NHS maybe- even public services and unis have been laying people off . The self employed haven’t reduced house prices ‘for sale’ but they have certainly contributed to inflationary prices in rentals due to higher demand - people I know who would normally have bought pre the changes around 12 years ago are now renting long term due to this.

Didn't a lot of this house price inflation start after mortgages were deregulated, allowing people to borrow higher multipliers of their income? A house, like anything, is only worth what people are able and willing to pay.

It was a factor, certainly. Many factors that are intended to help people buy just push the price up for everyone.

When we bought we could only borrow 3x one income or 2.5x two incomes. It was frustrating as we missed out on my dream house by a relatively small amount, but obviously if we could have borrowed 4x income the price would have been higher as the other buyers would have borrowed more too...

I could buy a one-bedroom flat in London, because I cashed in a pension from working overseas for the 5% deposit, and took an interest only variable rate mortgage for 3x my professional salary. Then came several years of negative equity in the early 1990s recession, when I subsidised the tenant's rent £200 per month for four years. Finally the situation turned more favourable and prices rose so I sold it, but the endowment never delivered the promises made and would have fallen 25-35% short of paying out the "expected" amount. I got £36k for what was projected to hit £56,500 if it had matured. I don't have the rose-tinted lenses to see any of this as greedy boomer profiteering; it felt extremely perilous at the time.

OP, there are many other factors, too!

Wages have been consistently driven down in comparison to house prices and CoL. Who/what has driven this?

Greed: the greed of Companies like Thames Water, who have been paying out millions to their corrupt leaders executives and far too much to their greedy shareholders, while doing nothing to improve their service, in fact, letting standards decline so much that they release large quantities of raw sewage into our rivers and waterways regularly. At the same time, they reduce wages for the employees that actually do the work for them, while creating the maximum number of redundancies so that their operation runs at the lowest cost possible. This pattern has been repeated in every other industry, too.

In 1999, when I purchased the house I’m still living in, what I earned as a junior programmer, plus DH’s wages as an engineer, were enough for us to obtain a mortgage of 2.5x joint salary, we added that to the equity of £40,000 that had been growing since we became homeowners 15 years before, to buy this house. The mortgage we got was therefore, for just under 70% of the cost of the house.

26 years later, both me and DH have progressed in our careers, and are both at middle-management level - but what we are being paid now would not enable us to borrow any more than 32% of what the house is worth currently, if we use the same equation of 2.5x joint income - so it’s wage degradation in a huge part, too!

In order to rein it in, the Government would have to take action that would be unpalatable to landlords, newer home owners and investors in real estate, as they would have to set a maximum rental rate by area that was low enough to enable those on minimum wage to be able to rent on about 1/3 of their take-home pay…

Of course, if everyone could afford to rent at a much lower rate than mortgage payments on an owned property, home ownership would become less desirable, and prices would crash - eventually, and a new cycle of home ownership would be established. They would have to put a cap on ownership at that point, if not before, so that people with more money couldn’t buy more homes to make money from, and get us back to where we are now.

It would be wildly unpopular though, and take a very brave Government to do it!

Most councils do charge a premium for long term empty properties through Council Tax.

Do you mean the tenant subsided you in making a profit of £36k for simply owning an asset?? That may be less than you wanted but it's a lot of money to make for simply buying something and then selling it four years later!

So much emphasis on the micro economics of the uk to support entrenched political viewpoints with no understanding of macro and international dynamics.

Inequality has massively increased. Not inequality of income but inequality of wealth. But wealth is not taxed. Tax wealth. Income has remained stagnant and is not the driver of house price increases. Neither is change in lending policies or population growth through migration. Wealth inequality is the reason for viewing housing as a profit producing asset and the reason for high housing costs during wage stagnation meaning that ordinary young people are excluded from buying but have to pay high tents unless they are subsidised by parents who allow them to live at home as adults or gift them deposit.

@p1nkp0ny The rent did not cover the mortgage for four years.... I put in £200 per month to top it up, and there were subsequent tenants, some of whom were friends, for another nine or 10 years. When I sold it, I repaid the capital amount borrowed which was still £56k and continued the endowment/savings element which was a separate amount because it was on track to produce a profit and then, puff of smoke, it wasn't.

You are correct that I eventually got £36k but the price was 19-ish years of worry, wear and tear/damage, agency fees and void periods. I would have had better returns with stock and shares for my investment.

I think my point here is that this thread is all about how there is a housing catastrophe but are people really willing to support what it takes to resolve it?

A lot of the answers you give are exactly the reason we are in this mess. Eg. Borrowing more than 3x income- the inconvenient truth is that the U.K. needs a housing crash among other things but people only want to tinker around the edges.